Paris Economic Development Corp. FY 2011-12

Home Browse Search

Paris Economic Development Corporation (A Component Unit of the City of Paris, Texas) Notes to Financial Statements (Continued) September 30, 2012 Note 6: Commitments (Continued) (7) In connection with a first lien loan by a bank to a commercial operation in the amount of $5,800,000, PEDC has entered into a Guaranty of Collection agreement. The loan payment is guaranteed by an individual (and a related company), and in addition, PEDC has guaranteed the full and prompt collection of the principal and interest due under the note together with limited cost of collection. If the lender makes demand under the Guaranty of Collection ageement, the lender will allow PEDC to satisfy its liability in monthly installments as specified in the original note. The agreement is dated September 23, 2010, and will terminate when the note is paid or the expiration of ten years. (8) In August 2012, the Board of Directors approved the renewal of a$2,000,000 revolving line of credit with a bank for future economic development projects. The note is dated September 18, 2012, and bears interest at the initial rate of 1.29% which is due monthly. The principal is due in one payment on September 18, 2014, and is secured by sales ta�c revenues and other income — received by PEDC except that portion of income currently obligated or subsequent bond issued as contemplated by the Series 2010 bonds. The interest rate is subject to change based on changes in an independent index and the rate charged is to be 1.96% under the index which at September 12, 2012, was 3.25%. The note documents also provide for right of setoff by the lender in all accounts the lender holds and other restrictions pertaining to issuance of additional debt, maintenance of liquidity, and furnishing of financial information. At September 30, 2012, no funds have been advanced under this line of credit. Subsequent to September 30, 2012, PEDC drew $2,000,000 under this line and loaned it to a manufacturing company locating in Paris. The lien note bears interest at the initial rate of 3.25%, is due September 18, 2014, and is secured by equipment. Additionally, an incentive agreement relating to payment for jobs and training is also being considered. (9) PEDC contributes to a simplified employee pension plan for its employees. The contribution rate is 5% and amounted to $7,915 during the year ended September 30, 2012. Note 7: Risk Management and Subsequent Events PEDC is exposed to various risks of loss and has obtained insurance related to general liability, loan enforcement liability, errors and omissions liability, and automobile liability. Management has evaluated subsequent events through the date on which the financial statements were available to be issued.