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of City files for this project, it appears that neither BAGS nor the City were aware of this interest requirement when administration of the loan was returned to the City by ACHCD in 2005. Nevertheless, the City Attorney's Office has interpreted this language in the note as requiring 7% simple interest retroactive to the stated July 9, 2008 due date. Upon receiving this information, BACS initially discussed revising the note with City staff. BACS more recently requested that the interest be forgiven due to the misunderstanding about the note's due date, and the note being interpreted by the City as imposing interest. BACS now would like to pay off this loan in full from surplus funds from the 4344 Railroad Avenue project (which will require approval from the State of California as a senior lender). Prior to paying off the City HRP loan, BAGS requests forgiveness of the accumulated interest inasmuch as BAGS believes it was not the intent or expectation of the City to collect this revenue (which amounts to approximately $13,7002 in addition to the $27,893 principal amount based on 7% annual simple interest since 2008). Staff concurs with BACS' position that it was never the City's intent to achieve a 49% profit on a loan to a nonprofit used for a public purpose. Staff recommends that the Council approve the forgiveness of interest for the original loan in furtherance of the General Plan Housing Element: Goal 17, Policy 41 and related programs to support special needs households. As noted earlier, BACS plans to repay the full principal amount of the loan in the near future from surplus funds. When repaid, the $27,893 principal amount will be returned to the Housing Rehabilitation Program to be used to assist other low-income Pleasanton residents. Per the Policy for Write-Off of Uncollectible Accounts Receivable, adopted by the City Council on October 18, 2011, Council approval is needed for any write off of an account receivable that exceeds $10,000. Forgiveness of interest on a loan is similar to an account receivable, and thus this request is before the Council for consideration. Submitted by: Fiscal Review: Approved by: Brian Dolan Tina Olson Nelson Fialho Assistant City Manager Director of Finance City Manager Attachment: 1. 1993 Promissory Note 2 $29,873 principal x 7% interest rate =$1,951.51 interest per year; from 2008 to 2015 is 7 years; $1,951.51 annual simple interest x 7 years= $13,660.57. Page 3 of 3