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BACKGROUND The City has provided a Housing Rehabilitation Program (HRP) for many years. The HRP has traditionally been funded primarily with pass-through funds from the City's annual allocation of federal Community Development Block Grant (CDBG) funds. The HRP program provides small grants and larger loans to assist low-income Pleasanton residents to make necessary repairs to their homes to improve safety, as well as make modifications for accommodating disabilities. The HRP can also be utilized to assist rental properties with rehabilitation needs provided that the majority of the residents are considered low income. Prior to 2006, the HRP was administered on the City's behalf by the Alameda County Office of Housing and Community Development (ACHCD). In July 1993, Bay Area Community Services (BACS), a nonprofit agency that provides housing and services for the disabled, received a loan through the HRP in the amount of $27,893. The loan was part of a larger funding package to acquire and rehabilitate a six-plex located at 4344 Railroad Avenue to provide six units of housing for persons with disabilities. Additional funding for this BACS project was provided by the State of California and ACHCD as summarized below: Source Amount Loan Terms Balance State of $250,000 Principal forgiven 10% annually date [0] California of Regulatory Agreement $40,000 Interest at 3%; due 6/30/21 $35,800 County of $79,000 No interest; loan paid off [0] Alameda City of $27 893 Loan term was 15 years; $27,893 and Pleasanton no payments made to date interest of$13,700 DISCUSSION As part of the HRP loan process, BACS executed a Promissory Note in 1993 for a 15 year deferred payment loan for the project with a principal amount of $27,893 (Attachment 11). The language in the note was developed by ACHCD acting as the City's agent. In 2009, SACS asked the City to clarify the note regarding due date and whether interest would accrue. While the note says that repayment was due July 9, 2008, a question was raised by BAGS whether the 15 year term started February 2, 1996 when the loan amount was finalized (thus making payment due February 2, 2011). As payment was not made by SACS on July 9, 2008, the "This Note will not accrue interest ..." language was read as superseded by the language "...shall pay interest at a rate of seven (7) percent per year if this Note shall not be paid when due." Upon review ' The third and fourth lines of this note state a loan amount of$43,393. That amount was decreased on February 2, 1996 to the subject$29,893 "due to unused contingency funds"from the project resulting in a smaller loan, as written at the bottom of the note. Page 2 of 3