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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

Action of Board On: 10/13/2015

APPROVED AS RECOMMENDED

OTHER

Clerks Notes:

VOTE OF SUPERVISORS

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
,

BY:	, Deputy

RECOMMENDATIONS

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.

BACKGROUND (CONT'D)

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.

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