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CASSirLBl';RRY CITY COMbIISSION Minutes of July 25, 2011-Regular Meeting Page 14 of 18 the site. The purchase price was $2,250,000 and with closing costs totaled $2,278,346. To firnd the purchase, the City issued Land Acquisition Note Series 2005 on September 15, 2005 to Bank of America. It was in the form of an interest only note and no principal was scheduled to be paid down. The note was secured with the pledge of non-ad valorem revenues of the City. The land was acquired for the purpose of redevelopment and was deemed not qualified for tax exempt status. The applicable interest rate was 5.59%. The proceeds from the eventual sale of the land to a developer were envisioned for use to repay the loan. The loan was scheduled to balloon at the end of Fiscal Year 2008 and had to be refinanced. The loan was placed with Hancock Bank on September 11, 2008 (Land Acquisition Note, Series 2008). Hancock Bank was the low bidder and the new interest rate was 5.00%. This loan will mature on October 1, 2011 and absent any other action, will need to be refinanced again. The Casselberry CRA supported this purchase and has been paying the annual finance charges since the inception of the loan. To date, a total of $669,188 has been paid in interest. The annual debt service is $113,850. In Apri12007, the CRA paid to demolish all the commercial buildings on the site. The crlrrent note is scheduled to mature October 1, 201 1. All principle and accrued interest will be due and payable. The outstanding debt has been reissued twice already. Sales tax collected by the City has been pledged by the City as security for the long term debt. The revenue source has been in decline along with the economy and property values. Sales tax can no longer offer sufficient security to allow lower short term taxable interest rates followed by a balloon payment of principle. The debt could be converted into a conventional long term note where principal could be repaid over time. Finance charges would still apply but actual debt selvice that would need to be budgeted would be much higher to allow for the principal component. The payments would be very difficult for the CRA to carry. The burden would shift to the General Fund no later than the sunset of the CRA in 2015. The interest rate would be higher as well, given the longer term and the debt would still qualify as taxable. The City Commission discussed options at a workshop on debt held July 11, 2011. Consensus was reached to pay-off the Hancock Bank note from General Fund reserves. Budget Impact: Budget Amendment #11-045 authorizes the disbursement from the firnd balance of the General Fund of $2,314,119 topay-off Land Acquisition Note, Series 2008 payable to Hancock Bank. BA# 11-045: Explanation of Request: Authorization is requested to utilize General Fund reserves to pay-off the outstanding note payable to Hancock Bank. The note payable is in the form of a taxable interest only note that is set to balloon at the end of Fiscal Year 2011. The note is associated with the acquisition of a parcel of land on Lake Concord. It has a principal balance of $2,277,000 and interest is paid semi-annually at a rate of 5%. Fund balance reserves have accumulated sufficient to pay-off the note while maintaining the minimum fund balance reserve requirement. The City Commission expressed support topay-off the note at its workshop on July 11, 2011. If not satisfied, the loan would have to be refinanced before its matru•ity date of October 1, 2011. Account Plumber Account Description Amount INCREASE; 001-0190-517.71-23 Principle -Land Acq. Note $2,277,000 Series 2008