REPORT TO HOUSING AND HUMAN SERVICES COMMISSION
SUBJECT
Title
Consider Request from Sunnyvale Community Services for Forgiveness of 2003 Community Development Block Grant (CDBG) Loan in the amount of $400,000.
Report
BACKGROUND
In 2003, the City provided a loan of $400,000 in CDBG funds to Sunnyvale Community Services (SCS) to acquire a property located at 725 Kifer Road to serve as the agency's base of operations. This loan was provided at three percent simple annual interest for a thirty-five-year term with all payments of principal and interest deferred for the first fifteen years.
In early 2013, SCS wrote a letter to the City asking it to forgive the CDBG loan in full. That request was considered by the Council on August 27, 2013; however, Council continued the item and requested that staff return with modified alternatives, and staff presented several options, including:
* Option 1: Defer all payments of principal and interest to the end of term (2038);
* Option 2: Forgive interest accrued to date and reduce interest rate to zero percent going forward;
* Option 3: Forgive the loan balance at end of term.
On December 17, 2013, Council considered the options and approved Option 1, deferring the decision on Options 2 and 3 to the Housing and Human Services Commission (HHSC) for consideration and a recommendation to Council. The HHSC considered the request and on July 23, 2014, recommended (by a vote of 4-2-1, with one commissioner absent) that Council only approve Option 2. The Council subsequently approved the HHSC recommendation on, October 28, 2014 (Attachment 2).
Several Commissioners dissented from approving Option 3, on July 23, 2014, for various reasons, including: the potential of taking away funds from other agencies that also benefit the community and not being convinced that loan forgiveness was necessary or a best practice in loan administration. The fiscal impact of option 2 was an initial reduction in CDBG Revolving Loan Fund (RLF) payments ...
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