HomeMy WebLinkAboutAgenda Statement 1982/11/16 Item 7
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COUNCIL AGENDA STATEMENT
Item 7
Meeting Date 11/16/82
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:M TITLE: Resolution ~~f~7~Approvi ng an Amendment to an Agreement with
the Bank of America for Housing and Commercial Rehabilitation
EMITTED BY: Community Development Director ~4/5ths Vote: Yes No X )
City's agreement with the Bank of America is subject to renewal on
dust 1 of each year, and the interest rates are usually changed at that time
reflect the current market. This year, the bank agreed to remain on the
I rates until January 1, 1983, so the agreement was allowed to continue on a
nth-to-month basis without renewal . We have now negotiated slight i nterest
;e changes with the bank to be effective January 1, 1983. An amendment
:orporating changes and extending the original agreement has been negotiated
i is attached. Therefore, it is my
DhINIENDATION: That the Council adopt the resolution approving an
ndment to the rehabilitation agreement with the Bank of America.
RD/COMMISSION RECOMMENDATION: The CHIP Loan Committee has endorsed the
royal of this amendment.
Th i nterest rate we are abl a to negotiate for the program i s dependent upon
t e long-term cost of funds to the bank and the average size of each loan.
T e costs of funds has not appreciably changed since August 1981. Although
t e prime rate is now dropping, it is a 90-day rate and tends to fluctuate
m re rapidly than the longer (10 to 15 year) rates.
T e program was priced by the bank based upon a $10,000 average loan size.
S~aller loans cost proportionately more for the bank to service, while larger
1 ans cost less. The residential program has had a low average loan size,
w ile the commercial has been higher than $10,000. Therefore, it is
a propriate to raise the yield rate for residential loans and decrease the
r to for commercial laans.
SSION:
I recommend that the rate changes be passed through to the borrowers. The
c angel are slight and should have little impact on the City's loan programs.
A ditionally, the City's accounting workload will be significantly less with
t is approach.
Th{e loan categories will be affected by the rate changes as follows:
The 5% residential loan rate will remain the same, as its significant
degree of subsidy compensates the bank satisfactorily.
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The 10% residential loan rate will increase to 10.25%.
The 12% commercial loan rate will decrease to 11.75%.
Page 2, Item 7
t~leeti ng Date 11 /16/82.
Ad itionally, interest subsidy loans have been eliminated from the contract by
th s amendment, due to lack of use. The collateralized program offers higher
le erage over the long run for longer term loans.
Co ies of the original agreement with the bank are available in the Community
De elopment Department.
FI CAL IMPACT: A total of $252,000 of Block Grant funds have been allocated
to the Housing Rehabilitation Program (CHIP) in 1982-83. No additional funds
ha a been allocated to the commercial rehabilitation program, which has been
us ng previously allocated Block Grants and Redevelopment Agency funds.
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