HomeMy WebLinkAboutMINUTES - 10132015 - HA C.02RECOMMENDATIONS
APPROVE refinancing an existing loan with Westamerica Bank for the purchase of the Housing Choice Voucher
office located at 2870 Howe Road, Martinez, CA 94553 and AUTHORIZE the Executive Director and the Finance
Director to submit and execute all required documents to complete the refinancing.
BACKGROUND
On December 12, 2006, the Board authorized the purchase of the Howe Road property for $3,375,000. A purchase
agreement was executed on December 15, 2006 with an initial rate of 7.25% fixed for 10 years, with a balloon
payment due January 1, 2017. The loan has subsequently been refinanced several times in response to drops in the
prime lending rate. This first refinance occurred on June 1, 2008 at a 6.75% rate, then on January 1, 2012 at 6% and
finally on January 1, 2013 at 5.25%. In all cases, the loan was refinanced at a fixed 10-year rate with a balloon
payment of $2,255,000 due by January 1, 2017.
Federal funding for the program has declined significantly during the term of the loan. Because of this decline, it is no
longer financially prudent for the Housing Authority to make the balloon payment of $2,255,000 that is due on
January 1, 2017. HACCC staff contacted Westamerica Bank seeking to extend the term of the loan, eliminate the
balloon payment provision and lower the interest rate further. After negotiations, Westamerica Bank has agreed to
extend the loan by ten years and eliminate the balloon payment by offering HACCC a fixed, fully amortized rate of
4.85% per year. All other terms of the original Purchase Agreement with Westamerica Bank will remain the same.
Action of Board On: 10/13/2015 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF COMMISSIONERS
AYE:John Gioia, Commissioner
Candace Andersen,
Commissioner
Karen Mitchoff,
Commissioner
Federal D. Glover,
Commissioner
ABSENT:Mary N. Piepho,
Commissioner
Fay Nathaniel,
Commissioner
Seat Vacant, Commissioner
Contact: 925-957-8028
I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the
Board of Supervisors on the date shown.
ATTESTED: October 13, 2015
Joseph Villarreal, Executive Director
By: June McHuen, Deputy
cc:
C.2
To:Contra Costa County Housing Authority Board of Commissioners
From:Joseph Villarreal, Housing Authority
Date:October 13, 2015
Contra
Costa
County
Subject:REFINANCING OF LOAN WITH WESTAMERICA BANK FOR PURCHASE OF 2870 HOWE RD. MARTINEZ,
CA
BACKGROUND (CONT'D)
Joseph Villarreal, Executive Director and John Hunter, Finance Director will sign all required loan documents.
A copy of Westamerica’s Loan Refinance Proposal is attached.
FISCAL IMPACT
As of September 14, 2015, the outstanding principal balance on the existing loan was $2,349,282. Refinancing
for 10 years will result in a total loan cost of $2,979,222. Payments would be made on the full value of the interest
and principal and, so there would be no balloon payment due at the end of the term. The final payment would be
made in the fall of 2025. While refinancing will increase the total cost of the loan by $62,994, this will be spread
over 10 years and is preferable to having a balloon payment of $2,255,000 due on January 1, 2017. A balloon
payment at the beginning of 2017 would decrease HACCC’s anticipated voucher reserves by over 60%.
Additionally, HUD is now proposing to cut HACCC’s voucher administrative funding by 9% beginning on that
date as part of a national change in program funding. The loan will also cost HACCC $1,155 in fees, which will
be paid immediately. HACCC will continue to use voucher administrative fees from the U.S. Department of
Housing and Urban Development to fund all loan payments and fees.
CONSEQUENCE OF NEGATIVE ACTION
If the Board does not approve the proposed refinance, then HACCC will be required to make a balloon payment
in the amount of $2,255,000 on January 1, 2017. Such a payment may jeopardize HACCC’s financial health.
CLERK'S ADDENDUM
ATTACHMENTS
WestAmerica Proposal