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. CITY OF RIVERSIDE REDEVELOPMENT AGENCY MEMORANDUM Honorable Mayor & Agency Members Date: Item No.: October 3, 2000 5 Subject: Consider Modifying the Terms of the Note Secured by Deed of Trust between the Redevelopment Agency and Refreshing Spring Temple Church of God in Christ, Inc. Background On April 18, 2000, the Agency approved a temporary payment collection schedule for an underlying Note secured by Deed of Trust between Refreshing Spring Temple Church of God in Christ (Church) and the Redevelopment Agency. The Note and Deed of Trust were the result of the Disposition and Development Agreement whereby the Church purchased, for $150,000, three Agency owned lots to construct their new sanctuary. The original Note terms established an amortized repayment for the beginning $100,000 Note balance at $758.16 per month, amortized over an 18-year period. Since the repayment schedule began, the Church has suffered financial constraints, and a delinquent balance accrued. Earlier this year the Church presented their request to make temporary $400 monthly payments through June 2000, anticipating an improvement in their financial situation to resume the full repayment beginning July 2000. At that time it was noted that should the Church's financial situation not improve to debt service the $758.16 payment, there may be future consideration to revisit the terms of the Note. Current Issue The Church has maintained the temporary payment schedule as set forth on April 18, 2000. However, Church representatives have indicated that their financial situation has not improved, and they are unable to resume the original monthly debt service ($758.16) based on their current income stream. While their long-range goals anticipate an improved financial cash flow, they have yet to achieve it. Towards that end, they have requested the terms of the Note be reconsidered to allow for the monthly payment in the $500 range for three years, and then resume a fully amortized payment amount. During the three-year period some construction related loans would be paid-off, providing increased cash flow for the Church to address the debt service. Analysis The Agency's Note is secured in second trust deed position, behind a substantial first trust deed of $565,000. Since inception, the Church has had difficulty meeting the $758.16 monthly obligation, with the Note accruing a delinquent balance of both principal and interest. As originally structured, the Church cannot meet the debt servicing obligation ($758.16); however, the Church has earnestly expressed their commitment to address their obligation with the Agency. The Agency might consider restructuring the terms to produce a reasonable payment to reduce monthly debt service to one that the Church can maintain. It is important to note that the Church has demonstrated an ability and commitment to maintain the reduced, temporary $400 monthly payment. However the temporary $400 monthly payment under the original Note terms produces negative amortization. Restructuring the debt to amortize the negative amortization and delinquent "balloon balance" is a suitable workout strategy. In that respect, the following alternative terms could be considered: 1) Extend the term of the loan (from current 18-year term) to reduce the monthly payment. To formulate a $500+ monthly payment would require an extremely lengthy loan term (beyond 30 years). A loan term beyond 30 years is not considered the best solution. Additionally, it would not be beneficial to extend the Agency loan beyond the term of the underlying first trust deed. 5-1