20 Motion to authorize the City Manager to sign an irrevocable standby letter of credit for $393,520.00

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CITY COUNCIL AGENDA ITEM BRIEFING SHEET Submittal Date: Originating Department: Presented By: Agenda Item No.; 5-6-2008 Council Date: Finance Gene Anderson 20• 5-12 2008 RECOMMENDED MOTION: Motion to authorize the City Manager to sign an irrevocable standby letter of credit for $393,520,00. POLICY ISSUE~S~: Fiscal Management. BACKGROUND: The City of Paris was awarded Contract No. 719068 by the Office of Rural Community Affairs (ORCA) on September 10, 1999 granting $393,520 for infrastructure construction to support 38 homes in the Eastgate subdivision. Because less than 51% of the 35 homes actually built were sold to low-to-moderate owner-occupants, the City is in non- compliance with this contract requirement. The City has been given until December 31, 2008 to correct this problem. However, ORCA is also requiring, as a condition of this extension, that the City of Paris execute an irrevocable standby letter of credit in the amount of $393,520 payable to ORCA guaranteeing repayment if the non-compliance issue is not settled by the deadline given. As part of that letter of credit process, Liberty National Bank requires a note (loan document) for the same amount to be in place in order for them to recover the money they will pay to ORCA. If the deadline is not met, ORCA will exercise its right under the letter of credit, and Liberty National Bank will pay the $393,520 to ORCA. At that time, Liberty National Bank will ask the City if it wishes enter into the loan agreement or if it wishes to make a lump sum payment to Liberty National Bank to cover the letter of credit. BOARD~COMMISSION RECOMMENDATION: NONE. EXHIBITS: Resolution, Letter of Credit and Loan Agreement from Liberty National Bank. ACTION: BUDGE'T INFO: ❑ Financial Report ❑ Minute Order Expense~ $N/A ❑ Department Report ~ Resolution Budgeted Amt. $N/A ❑ Presentation ❑ Ordinance y'I'D Actual $N/A ❑ Public Hearing ❑ Other Acct. Name N/A Acct. Number N/A FISCAL NOTES: None. REVIEWED AND APPROVED BY: ~ Administration ~ City Clerk ❑ Community Development ❑ EMS/IT ~ Finance ❑ Fire ❑ Municipal Court ~ Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Utilities City of Paris ~ Revised 2/04/08