SR 05:219 - Laserfiche WebLink

City Risks As can be imagined, a project of this types carries risks for all parties involved, including the City. Staff has taken steps to minimize these risks where possible but, clearly, some remain. A summary of the primary risks include: . Interest on the City loan of $2,490,000 will be repaid from project surplus cash and is subordinate to the COP's and HELP loan. As a result, while any unpaid interest will be accrued to future years, it is not guaranteed that it will be repaid. Interest payments will commence the first year after occupancy. However, during the first five years, any unpaid portion will be forgiven. Beginning in year six, any unpaid portion will be forwarded to future years. Interest will not compound on the unpaid portion. Any principal payments not made at the end of the lease term will be forgiven. As a result, should the development experience financial difficulties, interest payments may not be made. . The HELP loan is being made to the City, not the project, and as a result, the City is responsible for its repayment. As indicated, loan payments will be viewed as a project expense and as a result they will be made prior to any surplus cash payments. Nevertheless, there is latitude in making these payments and as a result, annual payments may be deferred in favor of meeting more critical operating expenses. In the event the full loan amount is not paid by the end of the term, the City will be required to pay any remaining balance. Should this occur, staff anticipates the City will be repaid through an additional loan agreement with the project owner. . In the event of default on the COP's, the COP holders or the bank providing a letter of credit ensuring payment of the COP's could assume ownership of the project, the property, the Regulatory Agreement, the City Loan and the HELP loan would be cancelled. This situation is similar to existing projects and while it is not desirable, it has been anticipated. To reduce the potential of default, the owner is required to provide financial reports to the City on a regular basis and the City has the option of meeting with BRIDGE and Eskaton to review project operations. Finally, as an option of last resort, the City could step in and make any debt payments to avoid default. . The concept of affordable assisted living, especially with unit affordability as deep as this project, is not fully developed in the marketplace and as a result, there will be challenges related to a range of issues including applicant income certification, income levels, priority admittance based on City preferences, the financial impact of the affordable units, and allowable income ranges. In addition, as with any project, this project is subject to market trends, which impact vacancy rates and charges for services. SR:05:219 Page 13