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Receive an update on the loan agreement between the Dixon Fire Station, LLC (Borrower) and the Redevelopment Agency of the City of Dixon (Lender)
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Published Notice Required? Yes ___ No _X _
Public Hearing Required? Yes ___ No _X _
RECOMMENDATION:
Receive an update on the loan agreement between the Dixon Fire Station, LLC (Borrower) and the Redevelopment Agency of the City of Dixon.
DISCUSSION:
Under AB1X 26 (HSC section 34177(e)), successor agencies are required to “dispose of assets and properties of the former redevelopment agency as directed by the oversight board; provided, however, that the oversight board may instead direct the successor agency to transfer ownership of certain assets pursuant to subdivision (a) of Section 34181. The disposal is to be done expeditiously and in a manner aimed at maximizing value.” If a successor agency violates their statutory duties any taxing entity, the department, and the Controller shall each have standing to file a judicial action to obtain injunctive or other appropriate relief. (HSC section 34177(a)(2).
The Dixon Successor Agency has yet to resolve the outstanding loan agreement between the Dixon Fire Station LLC and the Redevelopment Agency of the City of Dixon. The borrower has not made a payment since payments on the loan were due February 2020 and to date the Dixon Successor Agency has not taken any action to assume the existing debt obligations or foreclose on the property in order to pay the affected taxing entities. In September 2023, this Board gave direction to the SA to follow one of the legal options available to ensure the affected taxing entities receive their respective share of the entire loan proceeds in a timely manner and report to this Board.
The Dixon Successor Agency has communicated to this Board’s counsel their plan is to either foreclose on the property or allow a short sale of the property with certain restrictions. A short sale would require this board’s approval and agreement from all the affected taxing entities pursuant to HSC 34177. Counsel for the Borrower, the City of Dixon, and this Board have met numerous times to discuss the different options available for resolution of this matter. Counsel for the Borrower orchestrated an appraisal for the property and communicated the Borrower’s counsel’s recommendation to the Dixon City Council. The appraisal and letter to Dixon City’s Council (Attachment A) are attached to this agenda item along with the prior qualified broker’s opinion of value of the building (Attachment B). Prior recommendations have included the following:
1. City purchase the loan from the Successor Agency and pay the affected taxing entities (“ATE”) their respective share of the entire loan proceeds immediately;
2. City purchase the loan from the Successor Agency and negotiate structured payments with the ATE that pay off their respective share of the entire loan proceeds over the next 3 years (i.e., 2025 deadline for the Successor Agency to wrap up under AB1X 26);
3. City assume the existing debt obligation payments of the Borrower and bring obligation current and continue to make payments to ATE in accordance with existing loan terms to be paid in full in 2030. City to be repaid by Borrower under new terms between City/Borrower; or
4. City offer a guarantee of the current proposed restructuring of Borrower’s loan including monthly interest payments and balloon payment at the end of the renegotiated term.
The City of Dixon has indicated that none of the above recommendations are attractive options for their consideration. The City of Dixon would like this Board to consider and provide feedback on the plan to allow the property to be sold in a short sale, which will likely result in the affected taxing entities receiving a fraction of their respective share.
FINANCIAL IMPACT:
There is no financial impact for the Board to receive an update.
ALTERNATIVES:
No action is being requested so there are no alternatives for consideration. This is a discussion item.
OTHER AGENCY INVOLVEMENT:
The Dixon Successor Agency was consulted on this item and plans to provide input for discussion.