04/18/2000 RA RPT 12 - Laserfiche WebLink

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CITY OF RIVERSIDE COUNCIL/AGENCY MEMORANDUM Honorable Mayor & City Council and Redevelopment Agency Date: April 18, 2000 Item No.: 12 Subject: REQUEST INFERFUND LOANS TO REIMBURSE STARTUP COSTS FOR MAGNOLIA CENTER PROJECT AREA - ADDITIONAL APPROPRIATIONS Background City funds were used to pay a total of $190,525 for the feasibility studies and analyses needed to form the Magnolia Center Project Area. A total of $90,525 of General Fund Economic Development Reserve funds were used: Council/Agency action of February 4, 1997 authorized $41,000 for the Phase I Feasibility Analysis; Council/Agency action of August 26, 1997 authorized $55,000 to fund Phase II analysis; and the remaining amount necessary to form the project area was provided by a budget transfer from the Economic Development Reserve. In addition to funds from the Economic Development Reserve Accounts, the Magnolia Centc;r Neighborhood Advisory Committee approved the allocation of Community Development Block Grant (CDBG) Funds in the amount of $100,000 toward Phase H analysis of project area formation. $50,000 of CDBG funds was budgeted in fiscal year 97/98 and the remaining $50,000 was budgeted in fiscal year 98/99 for this purpose. All City funds were to become loans from the project area only after the Magnolia Center Project Area was formed. Current Issue The Magnolia Center Project Area plan was adopted in July 1998. Loan agreements should now be executed to repay the City for project area formation costs. Redevelopment project areas must show debt to collect tax increment revenues. Analysis The Magnolia Center Project Area could repay the Economic Development Reserve an interfund loan in the amount of $90,525 over a five-year term at the interest rate earned by the City's cash investment pool. Interest will accrue from the date of the loan a~eement. The $100,000 interfund loan to the CDBG fund could also be repaid over five years. The CDBG fund earns no interest, so no interest will accrue on this loan. Development staff will return to the Council to appropriate CDBG program income from the loan repayment to other activities in the Magnolia Center neighborhood. Fiscal Impact Projected revenues in the Magnolia Center Project Area wilI be sufficient to repay the interfund loans beginning in fiscal year 2000/01. Alternatives Council/Agency could choose to consider City funds used to form the project area as a grant. This alternative would mean that the Magnolia Center Project Area could not receive tax increment revenue until other .debt is issued. Committee Action Staff presented this item to the Finance Committee on April 10, 2000. The Committee concurred in the suggested recommendation and then moved this item forward for consideration by the City Council and Agency Board. 12-1