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HomeMy WebLinkAboutCCMPacket2013-11-19CITY COMMISSION MEETING AGENDA FOR NOVEMBER 19, 2013 5:30 P.M. ROLL CALL INVOCATION PLEDGE OF ALLEGIANCE — Michael -Ellen Walden — Paducah Tilghman High School Freshman PRESENTATION —Paducah -McCracken County Joint Sewer Agency Project Briefing — J. HODGES ADDITIONS/DELETIONS L ORDINANCE — INTRODUCTION A. Request for Loan Guaranty Renewal for GPEDC Loan — CITY NIGR II. CITY MANAGER REPORT III. MAYOR & COMMISSIONER COMMENTS IV. PUBLIC COMMENTS V. EXECUTIVE SESSION Agenda Action Form Paducah City Commission Meeting Date: November 19, 2013 Short Title: Information Age Park Loan Guaranty - Renewal ®Ordinance ❑ Emergency ❑ Municipal Order ❑ Resolution ❑ Motion Staff Work By: Presentation By: Background Information: Jeff Pederson, Jonathan Perkins Jeff Pederson In 2003, The Kentucky Economic Development Finance Authority (KEDFA) reissued a loan of about $3.5 million to GPEDC for construction of the Information Age Park. KEDFA offered to reduce the interest rate on the loan from 8% to 3% and extend the loan terms for five more years at 2% interest if GPEDC made an immediate payment of $443,751. GPEDC negotiated a loan with Union Planters Bank for the payment of $443,751, subject to a guaranty by the City of Paducah and McCracken County. The original loan of $443,751 to Regions Bank (formerly Union Planters Bank) is up for renewal, with the balance now being $361,437.97. GPEDC will make an immediate payment on the principal balance of $20,000 when the note renews, leaving a balance of $341,437.97. GPEDC is obligated to make the minimum payment of $20,000 annually on the principal, plus interest. Goal: ®Strong Economy ❑ Quality Services❑ Vital Neighborhoods❑ Restored Downtowns Funds Available: Account Name: Account Number: Finance Staff Recommendation: Adopt an Ordinance authorizing the Mayor to execute a Loan Guaranty instrument with Regions Bank (formerly Union Planters Bank). Paducah 1: . Delivering results. Fast. November 14, 2013 Mr. Jeff Pederson City Manager City of Paducah PO Box 2267 Paducah, KY 42002-2267 Re: Letter of Request; Paducah Economic Development (GPEDC, Inc.) Note at Regions Bank Dear Jeff, As a follow-up to the phone call and emails regarding the note GPEDC, Inc. has with Regions Bank, we would like the City of Paducah to continue its previous role in guaranteeing the note as it has done since 2003. GPEDC, Inc, pays $20,000 each year to reduce the note, plus the quarterly interest payments. The note is renewed annually each November. The original note was for $443,751.28 and it was used to pay interest on the $3.5 million loan with KEDFA (Kentucky Economic Development Finance Authority) for funding of the Information Age Park. GPEDC, Inc. continues to pay down on the KEDFA note as well as the one with Regions Bank. We appreciate the City of Paducah's past guarantee of the note, along with McCracken County, and ask that the City again approve Mayor Kaler executing the document with Regions Bank. Sincerely, Chad Chancellor President/CEO toll free OFFlce ePaclucah.com 03/20/03 1.4:26 FAX 2704426000 DENTON&KEULER WHITLOW, ROBERTS, HOUSTON& STRAUB, PLLC Attorneys at Law Henry O, Whitlow Richard C. Roberts Gary B, Houston Mark C. Whitlow E. Frederick Straub, Jr. R, ady L. Trecce* R. Christina Hutson James A. Sigler Ronald F. Kupper C. Thonns Miller Guthrie H. Allmo Joe H. Kimmel, iii - *Also Admitted in Illinois OAlso Admitted in Louisiana *Also Admitted in Illinois, Georgia and Arkansas Mr. Danny James Union Planters Bank, N.A. P. 0. Box 2200 Paducah, KY 42002-2200 OLD NATIONAL BANK BUILDING 300 BROAD WAY PADUCAH, KENTUCKY 42001 270.4434516 March 19, 20 - ..arED�PARTM Re: City Guarantee of Dear Danny: 0002/003 Maz_ 'I�Addrt : Post Office Box 995 Paducah, KY 42002-0995 Fax/telecopirr 270.443.4571 www.whitlow-law,cou, Thomas S. Waller 1890-1975 Thomu W. Threlkcld 1905.1985 ---- Of Cuunsd Aaae F, Gwino � C��x GPEDC Obligation You have asked me to review the legality of the City of Paducah's guarantee of the GPEDC loan from Union Planters Bank. The purpose of the loan is to pay interest to an agency of the Commonwealth of Kentucky on the Commonwealth's loan to GPEDC, Inc., which is secured by a first mortgage on most of the Information Age Park, The City Attorney, David Denton, raised a question as to whether the City could act as a guarantor of this obligation based upon Kentucky Constitution Section 179 which states that the General Assembly shall not authorize any county or subdivision thereof, city, town or incorporated district to loan its credit to any corporation, association or individual except for the purpose of constructing or maintaining bridges, turnpike roads or gravel roads. A literal reading of this constitutional provision would 1-ead to the conclusion that the City's guarantee of the obligation is improper. However, Kentucky courts have taken an expansive view of Section 179 and have concluded that it does not prohibit a city from extending its credit or money for activities deemed to be for Public purposes. Ezelle v. Cit of Paducah, 411 S.W,2d 162 (1969); Board of Trustees of Reform v. Cit of Le ton, 65 S.W. 350 (1901). Also, opinions from the Kentucky Attorney General support the position stated in these cases that the City can use its funds to assist public purposes. OAG 99-5. 03/20/03 14:26 FAX 2704426000 DENTON&KEULER . @J 003/003 Mr. Danny James March 19, 2003 Page 2 The concept of "public purpose" has been applied broadly by the Kentucky Attorney General, OAG 77-124. In this opinion, the Attorney General states that: The test of a public purpose should be whether the expenditure confers a direct benefit of reasonably general character to a significant part of the public, as distinguished from a remote or theoretical benefit. The Kentucky General Assembly created the Industrial Development Authority law which has been utilized by the City and County in establishing the Paducah -McCracken County Industrial Development Authority. This statute, KRS 154.50-346, acknowledges that the acquisition of lands for industrial sites is a public and governmental function and an exercise for a public purpose. Although the Industrial Development Authority law does not apply to GPEDC, its provisions give support to the functions of GPEDC as encompassing a public purpose which would insulate the City,s guarantee from violation of Kentucky Constitution Section 179. From my review of the applicable laws, it is my opinion that the City may act as a guarantor of the GPEDC, Inc., loan from Union Planters Bank. If you have any addition questions,.please contact me. Thank you for referring this matter to me for review. MCW:blh cc: Jim Zumwalt David Denton, Esq. 238184.1 Sincerely, 4WHITL �R%OBERTS, HQUST^ON Ma C. whitlow mwhi�hitloa-law com & STRAUB, PLLC DFPARTM-N'f FIPSAMD F E6 19 2004