HomeMy WebLinkAbout17. 16-478SEPTEMBER 27, 2016 16-478 RESOLUTION
(CARRIED___6-1___ LOST________LAID OVER________WITHDRAWN________)
PURPOSE: APPROVE AGREEMENTS WITH GO HNI AND VERVE CREDIT
UNION TO PROVIDE CASH COLLATERAL IN SUPPORT OF GO
HNI’S ACQUISITION AND REHABILITATION OF PROPERTIES
WITHIN THE CITY
INITIATED BY: DEPARTMENT OF COMMUNITY DEVELOPMENT
WHEREAS, the City of Oshkosh has entered into an Agreement with Greater
Oshkosh Healthy Neighborhood Incorporated (“GO HNI”) for the purposes of providing
services in support of Oshkosh Neighborhoods; and
WHEREAS, Verve Credit Union is willing to enter into an agreement to provide a
Line of Credit to GO HNI for the purposes of purchasing and rehabilitating properties; and
WHEREAS, Verve requires cash collateral for the Line of Credit which GO HNI is
unable to provide at this time; and
WHEREAS, the City desires to support GO HNI’s purchase and rehabilitation of
properties by providing cash collateral for the Line of Credit to GO HNI in support of GO
HNI’s performance of its Agreement with City.
NOW, THEREFORE, BE IT RESOLVED that the proper City Officials are hereby
authorized and directed to execute and deliver an Amendment to the Agreement between
the City and GO HNI and a Cash Collateral Agreement with GO HNI and Verve Credit
Union for purposes of providing cash collateral in support of GO HNI’s acquisition and
rehabilitation of properties within the City of Oshkosh in substantially the same form as
attached hereto, any changes in the execution copies being deemed approved by their
respective signatures, and said City officials are authorized and directed to take those steps
necessary to implement the terms and conditions of the Agreements.
MEMORANDUM
TO: Honorable Mayor and Members of the Common Council
FROM: Allen Davis, Community Development Director
DATE: September 22, 2016
SUBJECT: Approve Agreements with Greater Oshkosh Healthy Neighborhood
Incorporated (GO HNI) and Verve Credit Union to Provide Cash
Collateral in Support of GO HNI'S Acquisition and Rehabilitation of
Properties within the City
Background
Greater Oshkosh Healthy Neighborhood Incorporated (GO -HNI), a public - private
partnership is seeking City support in opening a Line of Credit for their housing acquisition
and rehabilitation activities. Since GO -HNI is less than a year old, GO -HNI has no track
record needed for obtaining a Line of Credit for these activities.
One alternative is for the City to place $200,000 into a Certificate of Deposit which would
then be used as collateral for the GO -HNI Line of Credit. GO -HNI solicited proposals from
financial institutions and received a proposal from Verve Credit Union. This proposal
would involve a 3 -way agreement with the City, Verve and a Line of Credit for GO -HNI.
GO -HNI's real estate redevelopment activities could then draw on the Line of Credit for
the acquisition, rehabilitation and renovations as the project required. Verve would pay
the City a 0.8% interest rate on the 24 month CD. Verve would loan GO -HNI funding
through the line of credit at a rate of 2.8 %.
Analysis
The Collateral Agreement between the City, GO -HNI and Verve, and Agreement between
the City and GO -HNI includes the following features:
• Performance measure.
• Accountability.
• Communication and transparency.
• A private fundraising strategy.
GO -HNI has received or will receive the commitment and resources from private and not-
for- profit organizations in order to fund any expenses that are not recovered through the
sale or lease of the renovated property.
The City is at some risk — if GO -HNI draws funds from the Line of Credit for a project, but
does not complete the project and repay the Verve, the City's CD could be used to satisfy
the Verve repayment to the Line of Credit. In a worst case scenario, the City would have to
attempt to recover any funds stemming from a project that GO -HNI would not complete.
The City could finish the renovation and sell the property in order to recover part or all of
the loss of the CD.
Fiscal Impact
The proposed City investment of $200,000 would come from the existing Healthy
Neighborhood Initiative fund which has a fund balance of about $1,400,000. These funds
can only be used for housing programs and does not affect the General Fund.
Recommendation
The City Council approves the Agreements.
Submitted,
Allen Davis,
Community Development Director
Approved,
Mark Rohloff,
City Manager
CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT between Verve, a Credit Union, organized and existing
under the laws of the State of Wisconsin ( "Verve "), and the City of Oshkosh, a municipal
corporation, organized and existing under the laws of the State of Wisconsin( "City ").
WHEREAS, the City of Oshkosh has entered into an Agreement with Greater Oshkosh
Healthy Neighborhood Incorporated ( "GO HNI ") for the purposes of providing services in
support of Oshkosh Neighborhoods and has entered into an Agreement with GO HNI for the
purposes of providing cash collateral in support of GO HNI's acquisition and rehabilitation
of properties within the City of Oshkosh; and
WHEREAS, Verve has entered into an agreement to provide a Line of Credit to GO HNI for
the purposes of purchasing and rehabilitating properties as provided for by the Agreement
between City and GO HNI; and
WHEREAS, Verve requires cash collateral for the Line of Credit; and
WHEREAS, City is willing to provide cash collateral for the Line of Credit to GO HNI in
support of GO HNI's performance of its Agreement with City.
NOW, THEREFORE, in consideration of the mutual promises contained herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, City and Verve agree as follows:
1. Cash Collateral. As security for the payment of all obligations of GO HNI under the
Line of Credit in the amount of two hundred thousand dollars ($200,000.00) issued by
Verve to GO HNI for the purposes of purchasing and rehabilitating properties as
provided for by the Agreement between City and GO HNI (the "Line of Credit "), City
shall deposit two hundred thousand dollars ($200,000.00) in the form of a certificate of
deposit with Verve (the "Cash Collateral ").
2. Term. The Certificate of Deposit shall be a two year Certificate of Deposit.
3. Interest Rate. The Certificate of Deposit shall bear interest at the rate of 0.80 %.
Interest may be invested or reinvested, or if not invested or reinvested shall be
deposited and held in a cash collateral account for the purposes identified in this
Agreement.
4. Lien of Verve on Collateral Fund for payment of Line of Credit. City hereby grants to
Verve a lien on and security interest in the Cash Collateral specified in paragraph 1
above for the payment of any amounts due under the Line of Credit.
5. Verve may apply the Cash Collateral to satisfy any amounts due and owing for which
GO HNI may be in default under the terms of the Line of Credit. Prior to application
of the Cash Collateral to the amount in default, Verve shall provide City and GO HNI
five (5) business days notice of Verve's intention to satisfy the amounts due from the
Cash Collateral including the amount to be satisfied and a description of the default.
City or GO HNI may within the five (5) business days arrange for payment to Verve of
the amounts due from other sources of funds. If City or GO HNI shall not pay the
amounts due within five (5) business days of written notice of the default, Verve may
apply the Cash Collateral to the amounts due and owing without further notice to City
or GO HNI.
6. Maintaining the Cash Collateral Account. So long as the Line of Credit remains
outstanding, City will deposit and maintain at all times an amount in the Cash
Collateral Account equal to the amount of the Line of Credit. If, at any time the
amount in the account is less than the amount of the Line of Credit, Verve shall notify
City in writing of the deficiency and City shall within five (5) business days make a
deposit into the account in the amount necessary such that the account is at least equal
to the amount of the Line of Credit.
7. Notices. Notices required by this Agreement shall be delivered by hand or by certified
mail to the following:
To the City:
Director of Finance
215 Church Avenue
P.O. Box 1130
Oshkosh, WI 54903 -1130
To GO HNI:
William Wyman, Board Chair
404 N Main St.
Ste 106
Oshkosh, WI 54901
To Verve:
John Hill
VP of Business Lending
2900 Universal St.
Oshkosh, WI 54904
When counting days specified under this Agreement, the first day shall be the date of
delivery if hand - delivered or the date of signature for certified mail and shall not
count toward the number of days required for any action.
8. City hereby represents that the execution and delivery of this Agreement have been
duly authorized by the governing body and the signatories to this Agreement and
other appropriate city officials have been authorized to take all necessary and
appropriate actions for the performance of this agreement.
9. Governing Law. This Agreement shall be governed by the Laws of the State of
Wisconsin.
In the Presence of:
(Seal of Contractor
if a Corporation.)
In the Presence of:
(Seal of Contractor
if a Corporation.)
(Witness)
(Witness)
APPROVED:
Lynn A. Lorenson, City Attorney
GO -HNI
By:
William Wyman, Board Chair
VERVE
By:
John Hill, VP of Business Lending
CITY OF OSHKOSH
Mark A. Rohloff, City Manager
And:
Pamela R. Ubrig, City Clerk
I hereby certify that the necessary provisions
have been made to pay the liability which will
accrue under this contract.
Trena Larson, City Comptroller
AMENDMENT
The City of Oshkosh, hereinafter referred to as CITY, and the Greater Oshkosh
Healthy Neighborhoods Incorporated, hereinafter referred to as the GO HNI have
previously entered into an Agreement under which GO HNI provides neighborhood
program, community building and engagement services to the City of Oshkosh in support
of the City of Oshkosh and neighborhood organizations within the City of Oshkosh.
Whereas, a part of the services to be provided by GO HNI under this Agreement
include real estate development including the acquisition and rehabilitation of properties
located within the City of Oshkosh; and
Whereas, GO HNI has received a commitment from Verve, a Credit Union, for
issuance of a Line of Credit to support the acquisition and rehabilitation of properties in the
amount of two hundred thousand dollars ($200,000.00); and
Whereas, Verve requires cash collateral as security for the Line of Credit; and
Whereas, GO HNI does not have the financial assets to provide the cash collateral
required at this time; and
Whereas, City is willing to provide cash collateral for the Line of Credit to GO HNI
in support of GO HNI's performance of its Agreement with City.
NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, City and GO HNI agree the following amendments are
to be incorporated into the original Funding Agreement. All other terms in the original
Funding Agreement remain unchanged and in effect.
1. GO HNI will enter into an Agreement with Verve, a Credit Union, for issuance of a
Line of Credit in the amount of two hundred thousand dollars ($200,000.00) to
support the acquisition and rehabilitation of properties under this Agreement as
previously entered into with City. GO HNI will use the Line of Credit to acquire and
pay for the rehabilitation of properties under the Agreement with City and for no
other purposes.
2. GO HNI shall develop appropriate policies or other evaluation tools to identify and
evaluate properties for acquisition and rehabilitation. Such policies and other
evaluation tools shall be subject to the approval of the City of Oshkosh. No funds
from the Line of Credit may be applied to properties or projects not in accordance
with the approved policies and evaluation tools.
3. GO HNI shall provide a monthly report to the City of Oshkosh for each project for
which funds are used from the Line of Credit, which shall include at a minimum, the
address of the project, the type of project, anticipated timeline for completion of each
significant stage of the project, status of the project completion, total anticipated
expenses related to the project, sources of funding for the project including additional
sources of funding should a project appear to be going over original budgeted funds
for such project, and anticipated revenue from sale of the completed project.
4. Cash Collateral. As security for the payment of all obligations of GO HNI under the
Line of Credit in the amount of two hundred thousand dollars ($200,000.00) issued
by Verve to GO HNI for the purposes of purchasing and rehabilitating properties as
provided for by the Agreement between City and GO HNI (the "Line of Credit "),
City shall deposit two hundred thousand dollars ($200,000.00) in the form of a
certificate of deposit with Verve (the "Cash Collateral ").
5. Lien of City on Properties acquired by GO HNI for rehabilitation under Line of
Credit. For any properties acquired and /or rehabilitated by GO HNI with funds from
the Line of Credit GO HNI shall grant to City a lien on and security interest in the
property for the amount of funds used from the Line of Credit. Such lien and security
interest shall be second to the primary lien of the Line of Credit. The lien and security
interest shall be established by a mortgage recorded in favor of the City of Oshkosh
upon the property.
6. Payment upon Line of Credit. GO HNI will make all payments of principal and
interest on the Line of Credit when due without regard to whether properties have
been sold at the time payments are due. Upon the sale of the rehabilitated properties
GO HNI will repay the Line of Credit with the proceeds of the sales for all funds,
including principal and interest, borrowed from the Line of Credit pertaining to the
property sold. Should the proceeds from the sale of any individual property not be
of sufficient amount to repay all funds borrowed under the Line of Credit for that
property, GO HNI shall upon sale of the property also make a payment in addition
to the proceeds of sale in an amount sufficient to pay all principal and interest
amounts related to such property borrowed from the Line of Credit.
7. Upon Notice of Default from Verve for any payment due under the Line of Credit or
pertaining to the application of the City's Cash Collateral Account in payment of an
obligation under the Line of Credit, GO HNI shall pay the amounts due within five
(5) business days of the written notice of the default.
In the Presence of:
(Seal of Contractor
if a Corporation.)
In the Presence of:
(Seal of Contractor
if a Corporation.)
(Witness)
(Witness)
GO -HNI
William Wyman, Board Chair
VERVE
John Hill, VP of Business Lending
CITY OF OSHKOSH
in
Mark A. Rohloff, City Manager
And:
Pamela R. Ubrig, City Clerk
APPROVED: I hereby certify that the necessary provisions
have been made to pay the liability which will
accrue under this contract.
Lynn A. Lorenson, City Attorney Trena Larson, City Comptroller