TO: Mayor Richard C. Irvin
FROM: Martin S. Lyons, Chief Financial Officer/City Treasurer
DATE: August 10, 2020
SUBJECT:title
Payment of Avalon Heights Short Term Loan through Current Line of Credit.
body
PURPOSE:
This report provides an update to the recently passed First Amendment to the Avalon Heights Redevelopment Agreement. This amendment provided for the short term loan of $1.5 million to Fox Valley Developers (FVD) to complete the School District building portion of the redevelopment project.
BACKGROUND:
Per the attached First Amendment the City has agreed to fund up to $1.5 million in construction costs for the completion of the School District Administrative facilities. This amendment was approved at City Council on July 14, 2020. Funding for this short term loan was proposed to come from an expansion of the Line of Credit with Old Second Bank of Aurora..
DISCUSSION:
Under a Debt Update provided to the City Council in June 2020, I provided an update showing that both the line of credit with Old Second Bank and with Fifth Third Bank has been fully committed at $20.0 million. While these lines of credit are committed, not all of the draws have been made on these lines.
After meeting with Old Second Bank, they have agreed, at the City's discretion to expand the current line of Credit to $11.5 million. At this meeting the City and the Bank also reviewed the potential to defer this expansion by using the current line of credit for the Avalon Heights $1.5 million loan and only expand the line of credit if actually needed by other draws. This can be done through a combination of managing the other draws from our development agreements and through strategically paying down the Line of Credit from Gaming Tax funds as was approved prior to the COVID 19 Pandemic. This approval was for a $3.0 million pay down in 2020. Staff is recommending that we pay down $1.5 million at this time, which will allow for the current Old Second Line of Credit to fund the Avalon Heights short term Loan.
Finally, the City is nearly complete with our negotiations with the Counties of DuPage and Kane, wherein we anticipate the receipt of approximately $2.5 million from DuPage County and $7.8 million from Kane County. This will help manage our cash flow and also allow us to hold off on any increases to lines of credit.
IMPACT STATEMENT:
The above strategy will keep the City's outstand debt at the lowest possible level for our current activities and will provide the funds needed for the Avalon Heights Development immediately, for the timely completion of the School District Facility.
RECOMMENDATIONS:
That the Finance Committee review the above funding. Utilization of Line of Credit Funding for the Avalon Heights loan has already been approved by the City Council. No formal action is required.
cc: Finance Committee.