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HomeMy Public PortalAbout20-05 Capital improvement1st Reading/Public Hearing: February 26, 2020 2nd Reading/Public Hearing: April 8, 2020 Adopted: April 8, 2020 Effective Date: April 8, 2020 Sponsored by: City Manager ORDINANCE NO. 2020-05 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF OPA- LOCKA, FLORIDA AMENDING ORDINANCE NO. 15-06 ENACTED BY THE CITY COMMISSION ON MAY 13, 2015 (THE "MASTER ORDINANCE") AND ORDINANCE NO. 15-07 ENACTED BY THE CITY COMMISSION ON MAY 13, 2015 (THE "SERIES ORDINANCE") WHICH PROVIDED FOR THE ISSUANCE OF $3,494,000 TAX-EXEMPT CAPITAL IMPROVEMENT REVENUE AND REFUNDING NOTE, SERIES 2015A AND $5,106,000 TAXABLE CAPITAL IMPROVEMENT REVENUE NOTE, SERIES 2015B (COLLECTIVELY, "THE NOTES"), IN ORDER TO IMPLEMENT THE TERMS OF A PROPOSAL BY CITY NATIONAL BANK OF FLORIDA (THE "BANK") TO MODIFY THE TERMS OF THE NOTES; AUTHORIZING RELATED AMENDMENTS TO THE NOTES AND TO THE NOTES AGREEMENT, DATED MAY 29, 2015, BETWEEN THE CITY AND THE BANK; AUTHORIZING CITY OFFICIALS TO EXECUTE DOCUMENTS AND TAKE ALL OTHER NECESSARY ACTIONS IN SUPPORT OF THE FOREGOING; PROVIDING FOR INCORPORATION OF RECITALS; PROVIDING AN EFFECTIVE DATE. WHEREAS, on May 13, 2015, the City Commission enacted Ordinance No. 15-06 (the "Master Ordinance") and Ordinance No. 15-07 (the "Series Ordinance") authorizing the issuance of $3,494,000 Tax -Exempt Capital Improvement Revenue and Refunding Note, Series 2015A (the "Series A Note") and $5,106,000 Taxable Capital Improvement Revenue Note, Series 2015B (the "Series B Note", and collectively with the Series A Note, the "Notes"); and WHEREAS, the Notes were issued on May 29, 2015; and WHEREAS, on the date of issuance of the Notes, City National Bank of Florida (the "Bank") made a loan to the City (the "Loan") evidenced by the purchase of the Notes from the City and the execution and delivery of the Notes Agreement, dated May 29, 2015, between the City and the Bank (the "Notes Agreement", and collectively with the Master Ordinance, the Series Ordinance and the Notes, the "Loan Documents"); and WHEREAS, the Notes are secured by the revenues derived by the City pursuant to the levy and collection of the Communications Services Tax and the Public Service Tax (the "Pledged Revenues"), which are received by the City from the State Department of Revenue on a monthly basis; and Ordinance No. 2020-05 WHEREAS, the monthly Pledged Revenues currently exceed the amount of monthly debt service payable on the Loan (such excess is hereinafter referred to as the "Excess Pledged Revenues"); and WHEREAS, on June 1, 2016, pursuant to Section 218.503, Florida Statutes, the Governor of the State of Florida issued Executive Order Number 16-135 which determined that the City was in a state of financial emergency and established a financial emergency board (the "Oversight Board") to oversee the activities of the City; and WHEREAS, on July 20, 2016, the Bank (by and through its counsel) sent the City a letter (the "Notice Letter") stating that the City was in default under several provisions of the Loan Documents, including, among others, its request for financial assistance from the State under Section 218.503, Florida Statutes and that the City's defaults gave the Bank the right to accelerate the Notes, at which point the entire debt would become due and payable and all of the Pledged Revenues would be required to be used to pay the Notes; and WHEREAS, on August 11, 2016, the Bank (by and through its counsel) sent the City a letter (the "Acceleration Letter") declaring the entire principal of the Notes to be due and payable immediately and, that pursuant to the provisions of the Loan Documents, the City was required to deposit all Pledged Revenues, as the same are collected, into the Tax Revenues Fund created under Section 401 of the Master Ordinance, hold such funds in trust for the benefit of the Bank until the Notes are paid in full, and not be used for any other purpose; and WHEREAS, to date, the City has been complying with such provisions, and as a result thereof, as of February 26, 2020, $4,991,502.88 of Excess Pledged Revenues is currently being held in the Tax Revenues Fund in trust for the benefit of the Bank (such Excess Pledged Revenues, plus any additional Excess Pledged Revenues that accumulate between the date of passage of this Ordinance and the Closing Date (as defined in Section 3 hereof), are hereinafter referred to as the "Accumulated Pledged Revenues"); and WHEREAS, on November 6, 2019, the Bank (by and through its counsel) sent the City a letter (the "Proposal") proposing modifications to the terms of the Loan in order to accommodate the needs of the City while relieving the Bank of some of its Loan exposure; and WHEREAS, on December 11, 2019, the City Commission adopted Resolution No. 2019-9720 approving the terms of the Proposal and authorizing the City Manager to execute all required documents to implement the Proposal: and WHEREAS, on December 19, 2019, the Chief Inspector General of the State, acting as the Governor's representative on behalf of the Oversight Board, approved the City Commission's approval of the Proposal: and WHEREAS, in order to implement the terms of the Proposal, the City Commission desires to approve the amendment of the Loan Documents and the execution and delivery of additional instruments and the taking of appropriate actions by authorized representatives of the City in connection therewith, all as more fully set forth herein. 2 Ordinance No. 2020-05 NOW, THEREFORE, BE IT ENACTED BY THE CITY COMMISSION OF THE CITY OF OPA-LOCKA, FLORIDA: Section 1. Recitals; Definitions. The recitals herein are incorporated by reference. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Loan Documents. Section 2. Authorization for this Ordinance. This Ordinance is adopted pursuant to the provisions of Section 1002 of the Master Ordinance with the consent of the Bank as the Holder of 100% of the Notes, which consent will be set forth in the First Amendment. Section 3. Amendments to Master Ordinance. The Master Ordinance is hereby amended by adding a new Article XIII, to read as follows: ARTICLE XIII PROVISIONS EFFECTIVE IN 2020 Section 1301. General. The provisions of this Article XIII shall become effective upon execution of the final documents that implement the terms in the Proposal (the "Closing Date"), and shall continue to be effective as long as the First Amendment to the Notes Agreement, dated as of the Closing Date, between the City and the Bank (the "First Amendment"), is in effect. The Closing Date shall be set forth in the First Amendment. Section 1302. Application of Accumulated Pledged Revenues. Notwithstanding anything to the contrary contained in the Loan Documents, on the Closing Date, the Accumulated Pledged Revenues shall be applied as follows: (a) First, to reimburse the Bank for all legal fees and costs incurred by the Bank for outside legal counsel to analyze the Loan Documents and advise the Bank on protecting its legal position thereunder, both incurred to date and those that will be incurred up to the Closing Date to facilitate and document the amendments to the Loan Documents required by the Proposal. (b) Second, the remaining amount shall be split evenly between the City and the Bank. Proceeds received by Bank will be applied to redeem a corresponding principal amount of the Series A Note. Proceeds received by the City will be used by the City for its own permitted purposes. The Accumulated Pledged Revenues, the amount of the legal fees and the remaining amount to be split evenly between the City and the Bank, all as of the Closing Date, shall be set forth in the First Amendment. Section 1303. Monthly Debt Service Payments on the Notes. The total current monthly debt service payments on the Notes is $43,601.00, of which $15,939.92 is applied monthly to debt service on the Series A Note and $27,661.15 is applied monthly to debt service on the Series B Note. Notwithstanding anything to the contrary in Sections 403 and 404 of the Master 3 Ordinance No. 2020-05 Ordinance, the City shall continue to make monthly debt service payments on the Notes in the amount of $43,601.00 until both of the Notes are paid full, and such amount shall be applied as follows: (a) During the period that both the Series A Note and the Series B Note are outstanding, $15,939.92 shall be applied monthly to debt service on the Series A Note and $27,661.15 shall be applied monthly to debt service on the Series B Note. (b) From and after the date that the Series A Note is paid in full and no longer outstanding, $43,601.00 shall be applied monthly to debt service on the Series B Note until the maturity date of the Series B Note. The City understands and acknowledges that this application will result in faster amortization of the Series B Note than would otherwise be the case under the current provisions of the Loan Documents. To the extent the provisions set forth above conflict with the provisions of Sections 403 and 404 of the Master Ordinance, or with any other provisions contained in the Master Ordinance or the other Loan Documents, such conflicting provisions shall be deemed amended hereby. Section 1304. Application of Excess Pledged Revenues. (a) During the period beginning from and after the Closing Date and ending on September 30, 2020, after the payment of the monthly debt service described above, all monthly Excess Pledged Revenues shall be withdrawn in each month and deposited to the City's general or special revenue fund from which such moneys were originally withdrawn and the amounts so transferred shall no longer be subject to the lien and pledge of the Master Ordinance. (b) The Bank, in its sole and absolute discretion, may choose to extend the application of the provisions of paragraph (a) for one additional fiscal year of the City beginning with the 2020-2021 fiscal year. The Bank shall notify the City in writing no later than September 1, 2020 whether or not it agrees to such extension for the 2020-2021 fiscal year. If the Bank does not agree to such extension, the City shall deposit the Excess Pledged Revenues into the Tax Revenues Fund and hold such funds in trust for the benefit of the Bank until the Notes are paid in full, and such funds shall not be used for any other purpose. (c) For each fiscal year thereafter, the Bank, in its sole and absolute discretion, may choose to extend the application of the provisions of paragraph (a) for one additional fiscal year of the City, regardless of whether or not it has extended the provisions during prior fiscal years. The Bank shall notify the City in writing no later than September 1 preceding the beginning of the next fiscal year whether or not it agrees to such extension for the next fiscal year. If the Bank does not agree to such extension, the City shall deposit the Excess Pledged Revenues into the Tax Revenues Fund and hold such funds in trust for the benefit of the Bank until the Notes are paid 4 Ordinance No. 2020-05 in full, and such funds shall not be used for any other purpose. If the Lender does agree to such extension, the Bank, in its sole and absolute discretion, shall determine how any Excess Pledged Revenues previously accumulated in the Tax Revenues Fund shall be applied as between the Bank the City. The City acknowledges and agrees that the Bank is entitled to apply all of such Excess Pledged Revenues to reduce the indebtedness represented by the Notes. Section 1305. Approval of First Amendment to the Notes Agreement. The execution and delivery of the First Amendment is hereby authorized. The First Amendment shall be in substantially the form attached hereto as Exhibit "A", with such changes, insertions, modifications and additions as may approved by the City Manager, in consultation the City Attorney. The City Manager and the Mayor are each hereby authorized and directed to execute, and the City Clerk is hereby authorized and directed to attest, the First Amendment. The execution and delivery of the First Amendment shall constitute conclusive evidence of the approval thereof. Section 1306. Confirmation of Master Ordinance and Series Ordinance. Except as expressly modified hereby, all other terms and provisions of the Master Ordinance and Series Ordinance shall remain in full force and effect. Section 1307. Effective Date. This Ordinance shall take effect immediately upon its enactment. PASSED AND ADOPTED on first reading this 26th day of February, 2020. PASSED AND ENACTED on second reading this 8th day of April, 2020. ATTEST: J nna Flores, City Clerk 2 APPROVED AS TO FORM AND LEGAL S. FICIENCY: B City Attorney is -Weeks, P.A. Matthew Pigatt, Mayor 5 Ordinance No. 2020-05 Moved by: VICE MAYOR DAVIS Seconded by: COMMISSIONER BASS VOTE: 5-0 Commissioner Bass: YES Commissioner Burke: YES Commissioner Kelley: YES Vice -Mayor Davis: YES Mayor Pigatt: YES 6 FIRST AMENDMENT TO NOTES AGREEMENT THIS FIRST AMENDMENT TO NOTES AGREEMENT (the "First Amendment"), effective as of , 2020, is entered into by and among CITY NATIONAL BANK OF FLORIDA (the "Lender") and THE CITY OF OPA-LOCKA, FLORIDA (the "City"), and amends and modifies the Notes Agreement, dated May 29, 2015, between the City and the Lender (the "Notes Agreement") in connection with the issuance by the City of its $3,494,000 Capital Improvement Revenue and Refunding Note, Series 2015A (the "2015A Note") and $5,106,000 Taxable Capital Improvement Revenue Note, Series 2015B (the "2015B Note" and, together with the 2015A Note, the "2015 Notes") and the purchase of the 2015 Notes by the Lender. RECITALS WHEREAS, on May 13, 2015, the City Commission enacted Ordinance No. 15-06 (the "Master Ordinance") and Ordinance No. 15-07 (the "Series Ordinance," and collectively with the Master Ordinance, the "2015 Ordinance") authorizing the issuance of the 2015 Notes (all capitalized terms not otherwise defined herein having the meaning ascribed thereto in the 2015 Ordinance or in the Notes Agreement); and WHEREAS, the 2015 Notes were issued on May 29, 2015; and WHEREAS, on the date of issuance of the 2015 Notes, the Lender made a loan to the City (the "Loan") evidenced by the purchase of the 2015 Notes from the City and the execution and delivery of the Notes Agreement (the Notes Agreement, together with the 2015 Ordinance and the 2015 Notes, are hereinafter referred to as the "Loan Documents"); and WHEREAS, the 2015 Notes are secured by the revenues derived by the City pursuant to the levy and collection of the Communications Services Tax and the Public Service Tax (the "Pledged Revenues"), which are received by the City from the State Department of Revenue on a monthly basis; and WHEREAS, the monthly Pledged Revenues currently exceed the amount of monthly debt service payable on the Loan (such excess is hereinafter referred to as the "Excess Pledged Revenues"); and WHEREAS, on June 1, 2016, pursuant to Section 218.503, Florida Statutes, the Governor of the State of Florida issued Executive Order Number 16-135 which determined that the City was in a state of financial emergency and established a financial emergency board (the "Oversight Board") to oversee the activities of the City; and WHEREAS, on July 20, 2016, the Lender (by and through its counsel) sent the City a letter (the "Notice Letter") stating that the City was in default under several provisions of the Loan Documents, including, among others, its request for financial assistance from the State under Section 218.503, Florida Statutes and that the City's defaults gave the Lender the right to accelerate the 2015 Notes, at which point the entire debt would become due and payable and all of the Pledged Revenues would be required to be used to pay the 2015 Notes; and 1 WHEREAS, on August 11, 2016, the Lender (by and through its counsel) sent the City a letter (the "Acceleration Letter") declaring the entire principal of the 2015 Notes to be due and payable immediately and, pursuant to the provisions of the Loan Documents, the City was required to deposit all Pledged Revenues, as the same are collected, into the Tax Revenues Fund created under Section 401 of the Master Ordinance, hold such funds in trust for the benefit of the Lender until the 2015 Notes are paid in full, and not be used for any other purpose; and WHEREAS, to date, the City has been complying with such provisions, and as a result thereof, Excess Pledged Revenues in the amount specified in Section 2 hereof are currently being held in the Tax Revenues Fund in trust for the benefit of the Lender (such Excess Pledged Revenues are hereinafter referred to as the "Accumulated Pledged Revenues"); and WHEREAS, on November 6, 2019, the Lender (by and through its counsel) sent the City a letter (the "Proposal") proposing modifications to the terms of the Loan in order to accommodate the needs of the City while relieving the Lender of some of its Loan exposure; and WHEREAS, on December 11, 2019, the City Commission adopted Resolution No. 2019-9720 approving the terms of the Proposal and authorizing the City Manager to execute all required documents to implement the Proposal: and WHEREAS, on December 19, 2019, the Chief Inspector General of the State, acting as the Governor's representative on behalf of the Oversight Board, approved the City Commission's approval of the Proposal pursuant to Resolution No. 2019-9720: and WHEREAS, in order to implement the terms of the Proposal, on , 2020, the City Commission enacted Ordinance No. 20- ("Ordinance No. 20- ) approving the amendment of the Loan Documents and the execution and delivery of this First Amendment; and WHEREAS, on , 2020, the Chief Inspector General of the State, acting as the Governor's representative on behalf of the Oversight Board, approved the City Commission's enactment of Ordinance No. 20- NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth in this First Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows with respect to the agreements to which they are a party: Section 1. Approvals and Waivers; Partial Optional Redemption of 2015A Note. (a) Pursuant to the requirements of Section 1002 of the Master Ordinance and Section 5.07 of the Notes Agreement, the Lender, as the Holder of 100% of the 2015 Notes, consents to the amendments to the 2015 Ordinance made in Ordinance No. 20- . (b) Pursuant to the requirements of Section 303 of the Master Ordinance and Section 2.06 of the Series Ordinance, the City hereby calls for optional redemption a portion of the Series 2015A Note in the Redemption Amount set 2 forth in Section 2 hereof. The Lender, as the Holder of 100% of the 2015A Note, hereby waives any notice requirements contained therein related to such partial redemption of the 2015A Note on the date hereof. Section 2. Amendments to Notes Agreement and Notes. The Note Agreement is hereby amended by adding a new Article VIII, to read as follows: ARTICLE VIII PROVISIONS EFFECTIVE IN 2020 Section 8.01. General. The provisions of this Article VIII shall become effective upon the Closing Date and shall continue in effect until the earlier of (i) the effective date of any additional amendments to the Notes Agreement or (ii) the maturity date of the 2015 Notes. Section 8.02. Final Amounts. Pursuant to the requirements of Section 3 of Ordinance No. 20- , the following are the final dates and amounts applicable to such sections and to Section 8.03 of this First Amendment: (a) The Closing Date is , 2020. (b) The Accumulated Pledged Revenues through the Closing Date are $ (c) The legal fees and costs incurred by the Lender for outside legal counsel through the Closing Date are $ (the "Legal Fees"). (d) The remaining amount of the Accumulated Pledged Revenues, after payment to the Lender of the Legal Fees, is $ (the "Remaining Amount"). Section 8.03. Application of Accumulated Pledged Revenues. Notwithstanding anything to the contrary contained in the Loan Documents, on the Closing Date, the Accumulated Pledged Revenues shall be applied as follows: (a) First, to reimburse the Lender for the Legal Fees. (b) Second, the Remaining Amount shall be split evenly between the City and the Lender. Proceeds received by Lender in the amount of $ (the "Redemption Amount") will be applied to the optional redemption of a corresponding principal amount of the 2015A Note. Proceeds received by the City will be used by the City for its own permitted purposes. Section 8.04. Monthly Debt Service Payments on the Notes. The total current monthly debt service payments on the Notes is $43,601.00, of which $15,939.92 is applied monthly to debt service on the 2015A Note and $27,661.15 is applied monthly to debt service on the 2015B Note. Notwithstanding anything to the contrary in Sections 403 and 404 of the Master Ordinance, the Notes Agreement or the 2015 Notes, the City shall continue to make monthly 3 debt service payments on the 2015 Notes in the amount of $43,601.00 until both of the 2015 Notes are paid full, and such amount shall be applied as follows: (a) During the period that both the 2015A Note and the 2015B Note are outstanding, $15,939.92 shall be applied monthly to debt service on the 2015A Note and $27,661.15 shall be applied monthly to debt service on the 2015B Note. (b) From and after the date that the 2015A Note is paid in full and no longer outstanding, $43,601.00 shall be applied monthly to debt service on the 2015B Note until the maturity date of the 2015B Note. The City understands and acknowledges that this application will result in faster amortization of the 2015B Note than would otherwise be the case under the current provisions of the Loan Documents. To the extent the provisions set forth above conflict with the provisions of the Notes Agreement or the 2015 Notes, such conflicting provisions shall be deemed amended hereby. Section 8.05. Application of Excess Pledged Revenues. (a) During the period beginning from and after the Closing Date and ending on September 30, 2020, after the payment of the monthly debt service described above, all monthly Excess Pledged Revenues shall be withdrawn in each month and deposited to the City's general or special revenue fund from which such moneys were originally withdrawn and the amounts so transferred shall no longer be subject to the lien and pledge of the Master Ordinance. (b) The Lender, in its sole and absolute discretion, may choose to extend the application of the provisions of paragraph (a) for one additional fiscal year of the City beginning with the 2020-2021 fiscal year. The Lender shall notify the City in writing no later than September 1, 2020 whether or not it agrees to such extension for the 2020-2021 fiscal year. If the Lender does not agree to such extension, the City shall deposit the Excess Pledged Revenues into the Tax Revenues Fund and hold such funds in trust for the benefit of the Lender until the Notes are paid in full, and such funds shall not be used for any other purpose. (c) For each fiscal year thereafter, the Lender, in its sole and absolute discretion, may choose to extend the application of the provisions of paragraph (a) for one additional fiscal year of the City, regardless of whether or not it has extended the provisions during prior fiscal years. The Lender shall notify the City in writing no later than September 1 preceding the beginning of the next fiscal year whether or not it agrees to such extension for the next fiscal year. If the Lender does not agree to such extension, the City shall deposit the Excess Pledged Revenues into the Tax Revenues Fund and hold such funds in trust for the benefit of the Lender until the Notes are paid in full, and such funds shall not be used for any other purpose. If the Lender does agree to such extension, the Lender, in its sole and absolute discretion, shall determine how any Excess Pledged Revenues previously accumulated in the Tax Revenues Fund shall be applied as between the Lender the City. The City 4 acknowledges and agrees that the Lender is entitled to apply all of such Excess Pledged Revenues to reduce the indebtedness represented by the Notes. Section 8.06. No Waiver of Defaults; Reservation of Lender's Rights. (a) The City acknowledges that (i) it is currently in default under the Loan Documents, (ii) as a result of such defaults, the Lender is entitled under the provisions of the Loan Documents to apply all of the Accumulated Pledged Revenues to reduce the indebtedness represented by the 2015 Notes, (iii) the Lender is entering into this First Amendment pursuant to which it is agreeing to permit the City to use a portion of the Accumulated Pledged Revenues for its municipal purposes solely to accommodate the needs of the City while relieving the Lender of some of its Loan exposure, and (iv) in future fiscal years of the City, the Lender will continue to have the right to demand that the monthly Excess Pledged Revenues be held for the benefit of the Lender if it decides not to extend the provisions of Section 8.05(a) hereof in future fiscal years. Accordingly, notwithstanding the financial accommodation extended by the Bank to the City under this First Amendment, the Lender reserves all of its rights and remedies under the Loan Documents, and nothing in this First Amendment is intended, and shall not be construed, (A) to be a waiver by the Bank in any manner of any existing defaults by the City under the Loan Documents or any rights or remedies available to the Bank under the Loan Documents, all of which are hereby expressly reserved by the Bank or (B) as precedent in any future negotiations between the Bank and the City to resolve any existing or future defaults by the City under the Loan Documents. (b) The Notice Letter and the Acceleration Letter remain in full force and effect. Section 8.07 Full Force and Effect. Except as expressly modified hereby, all other terms and provisions of the Notes Agreement and the 2015 Notes shall remain in full force and effect. Section 8.08 Multiple Counterparts. This First Amendment may be simultaneously executed in one or more counterparts, all of which shall constitute the same instrument and each of which shall be deemed an original. [COUNTERPART SIGNATURE PAGES FOLLOW] 5 COUNTERPART SIGNATURE PAGE FOR FIRST AMENDMENT TO NOTES AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed in their respective names by their duly authorized representatives as of the day and year first set forth above. Attest: Joanna Flores City Clerk Approved as to form and legal sufficiency: Burnadette Norris -Weeks, Esq. City Attorney CITY OF OPA-LOCKA, FLORIDA By: Matthew A. Pigatt, Mayor By: John E. Pate, MS, CM City Manager S-1 COUNTERPART SIGNATURE PAGE FOR FIRST AMENDMENT TO NOTES AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed in their respective names by their duly authorized representatives as of the day and year first set forth above. CITY NATIONAL BANK OF FLORIDA By: Name: Title: S-2 Bank Loan Amendment Overview In September, 2015 the City borrowed $8.6 million for ten years at a blended rate of 3.6%. Under the terms, debt service was $516,732 per year with a balloon payment of $6.04 million at the end of the ten-year loan term, resulting in total debt service of $11.21 million. This would have resulted in repayment of the $8.6 million principal and $2.61 million of interest. To fund the debt service, the City was required to pledge two revenue sources, FPL Utility Taxes and the State Telecommunications Service tax. In FY 17 this combined revenue was $1,604,057 and had grown to $1,853,253 by FY 19. After covering the annual debt service of $515,732, the "surplus" went to the General Fund to fund operations. With the declaration of financial emergency, the bank declared the City in default. Consequently, the bank retained the "surplus" in addition to the debt service. By the end of FY 17 the bank had retained $1.67 million of "surplus", adding approximately $1.2 million per year thereafter. As of February 21, 2020, this had grown to $4.99 million. Under the proposed amendment, the bank would release half of the retained "surplus" to the City and would use the remaining half to reduce the City's outstanding loan balance, in essence pre- paying a portion of the loan. Debt service payments will continue at the annual rate of $515,732 until termination of the loan in September, 2025. For purposes of analysis, it has been assumed the bank will reduce the retained "surplus" by approximately $100,000 for legal purposes, leaving $4.9 million for distribution and that the amendment would be effective March 1, 2020. The impact for the City would be as follows: 1. The City would get immediate access to $2.45 million of the retained "surplus" and would receive another $0.3 million of "surplus" during the remainder of FY 20 for a total of $2.75 million. The FY 20 budget assumed $1.06 million of "surplus" would be available, disregarding the fact the bank had been retaining the "surplus". Consequently, the $2.75 million of "surplus" made available by the amendment represents $1.69 million of additional unbudgeted General Fund funding for FY 20. Care should be given as to the use of these additional funds since, given its one-time nature, it shouldn't be used to fund ongoing programs. 2. The City can look forward in future years to the availability of this normal annual "surplus" for use in the General Fund, currently in the range of $1.3 million annually and growing as the revenue sources continue to grow. 3. As result of the $2.45 million pre -payment of the City's debt resulting from the bank's applying half of the retained "surplus" to this purpose, the balloon payment at the end of the loan period drops from $6.04 million to $3.11 million, reducing total debt service (and legal fees) for the ten-year period by $0.54 million, reflecting $0.6 million of interest savings, offset by the approximately $0.1 million of additional legal expense imposed by the bank. 4. If the effective date is later in the year, the impact will be a very slight reduction in the "surplus" available to the City this year, offset by an increase in the bank's loan pre- payment, a slightly lower balloon payment at the end of the loan term and a further slight reduction in interest expense.