33 - Approving a loan from the City of Paris to the Paris Economic Development Corpation in the amount of $2.5 million

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Item No. 33 Memorandum TO: Mayor & City Council FROM: Grayson Path, City Manager Stephanie Harris, City Attorney Gene Anderson, Finance Director SUBJECT: PEDC Loan DATE: December 13, 2021 4welliNk" Earlier in 2021, then Mayor Dr. Steve Clifford proposed to the City Council and the PEDC the concept of the City loaning to the PEDC available funding for the purposes of 1) paying off a PEDC note, 2) giving the PEDC a lower interest rate to help save tax dollars, and 3) giving the City a higher interest rate to help produce revenue greater than traditional investment mechanisms. In general, the City had available funding that, by loaning it to the PEDC, the City could receive an interest rate greater than the investment market while achieving a more favorable interest rate for the PEDC than what they could receive through traditional lending. The note would have to give the City the ability to call its funding if a financial emergency were to occur. The City is not a lending entity by nature, but as the PEDC is a function of the City, this was a valid route for the City Council to take. The City had to also restrict its lending capacity to money from the reserve. This was to protect its ability to cash flow its budget on an annual basis. STATUS OF ISSUE: After many months of negotiation and work, the attached note has been completed. It is for $2.5 million. The first three years will be at an interest rate of 2.14% (which is greater than what the City could achieve on its own and less than what the PEDC was paying). It is a ten (10) year note with a fifteen (15) year amortization, which means they will make monthly payments for ten years and then at the conclusion of ten years, there will be a balloon payment for the balance. This allows the PEDC to have more operational cash now as a 15 year amortization has lower monthly payments than a 10 year amortization.