05/16/2000 RA RPT 15 - Laserfiche WebLink

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People Serving People CITY OF RIVERSIDE CITY COUNCIL MEMORANDUM Riverside AII-Amedca City 1998 HONORABLE MAYOR AND CITY COUNCIL AND REDEVELOPMENT AGENCY DATE: May 16, 2000 ITEM NO: 15 Subject: ORANGE TREE PLAZA GARAGE INTERFUND LOANS - TRANSFER FROM SEWER FUND AND WORKER'S COMPENSATION FUND TO GENERAL FUND Background: Loans from the City to the Redevelopment Agency that partially funded the construction of the Orange Tree Plaza Parking Garage have been outstanding since 1987 and without a restructuring, the Agency will not have the resources in the near future to pay the loan balances. The Redevelopment Agency constructed Orange Tree Plaza Parking Garage 5 in 1987. Construction was financed in part by borrowing $3,000,000 from the City of Riverside as follows: $565,000 from the Parking Authority Fund (493); $1,335,000 tiom the Sewer Fund (550); and $1,100,000 from the Worker's Compensation Fund (610). Interest has accrued on the loans and, at June 30, 1999, a total of approximately $6.6 million was owed by the Agency for the Orange Tree Plaza loans. At a joint meeting of the City Council/Redevelopment Agency/Parking Authority on March 21, 2000, the amount owed to the Parking Authority was offset by closing the Parking Authority Fund (493) and transferring the fund balance to the Redevelopment Downtown/Airport Capital Projects Fund (478). This action leaves a current balance of approximately $5.3 million owed to the City's Sewer Fund and Worker's Compensation Insurance Trust Fund. Analysis and Proposal: As noted above, the original amount of the loan, $3,000,000, has grown to $5.3 million thirteen years later. If the current practice is to continue this amount will grow to a sum, which will be largely unmanageable. The Agency does not have the financial resources to repay this obligation without some type of restructuring. After examining the situation it appears that the use of General Fund resources to stabilize the situation will permit the Redevelopment Agency to repay the obligation they incurred in developing the Orange Tree Plaza parking structure. It is proposed that the General Fund purchase the loans from the Sewer and Workers' Compensation Funds. This transaction will not impact the General Fund undesignated fund balance. In addition, the General Fund will forgive any further interest accrual on the outstanding loan balance. In turn the Redevelopment Agency will budget $1,320,000 in FY 2000-01 to partially reduce the loan balance and in each subsequent fiscal year they will budget $320,000 to repay the loan. At this rate the loan will be repaid in approximately 13.5 years. Another possible outcome might occur if Mission District Associates exercises its option to purchase the Orange Tree Plaza garage. The maximum purchase price called for would be $2,760,000, which by itself is insufficient to repay the loan amount. If this were to occur the repayment period would be about five years. 15-1