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HomeMy WebLinkAbout15297RESOLUTION NO. 15297 A RESOLUTION APPROVING AN INTEREST RATE MODIFICATION TO A FIXED RATE OF INTEREST AT THE RATE OF FIVE AND SEVENTY-FIVE ONE HUNDREDTHS PERCENT (5.75%) WITH RESPECT TO THE 02/01/2018 PROMISSORY NOTE AND THE 02/12/2018 PROMISSORY NOTE OF BORROWER BIG R PROPERTIES LLC BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that SECTION 1. City Council approves the modification of interest rate with respect to the 02/01/2018 and 2/12/2018 Promissory Notes (“Notes”) of borrower Big R Properties, LLC, a Colorado limited liability company (“Big R”), from an adjustable interest rate computed at the “prime rate” of Wells Fargo Bank, NA plus one or one and one-half percent to a fixed rate of five and seventy-five one hundredths percent (5.75%). SECTION 2. Each of the Notes have a maturity date in 2028. Depending on the “prime rate”, the fixed rate hereby approved may constitute a variance to Section 14-4-85.3(b)(7), P.M.C. Each of the prior notes have previously been granted a variance to said section and City Council finds good cause for any variance that may be required by the fixed rate including (a) upon the same basis upon with the original variance were approved, (b) Big R and related entities have fully complied with all previous employment commitments; and (c) any cost savings would allow Big R to expand its workforce by potentially 15 to 20 FTE’s over the next 1-2 years. SECTION 3. The officers of the City are authorized and directed to perform any and all acts consistent with the intent of this Resolution to implement the policies and procedures described herein. The Mayor is specifically authorized to executed any statement of such modification to be placed as necessary on the originals of the Notes. SECTION 4. This Resolution shall become effective immediately upon final passage. INTRODUCED: July 10, 2023 BY: Vicente Martinez Ortega MEMBER OF CITY COUNCIL APPROVED: __________________________ PRESIDENT OF CITY COUNCIL ATTESTED BY: ________________________ ACTING CITY CLERK City Clerk's Office Item # M7 Background Paper for Proposed Resolution COUNCIL MEETING DATE: July 10, 2023 TO: President Heather Graham and Members of City Council CC: Mayor Nicholas A. Gradisar VIA: Marisa Stoller, City Clerk FROM: Nicholas Gradisar, Mayor SUBJECT: A RESOLUTION APPROVING AN INTEREST RATE MODIFICATION TO A FIXED RATE OF INTEREST AT THE RATE OF FIVE AND SEVENTY-FIVE ONE HUNDREDTHS PERCENT (5.75%) WITH RESPECT TO THE 02/01/2018 PROMISSORY NOTE AND THE 02/12/2018 PROMISSORY NOTE OF BORROWER BIG R PROPERTIES LLC SUMMARY: The proposed Resolution approves a modification of interest rate with respect to the 02/01/2018 and 2/12/2018 Promissory Notes (“Notes”) of borrower Big R Properties, LLC, a Colorado limited liability company (“Big R”), from an adjustable interest rate computed at the “prime rate” of Wells Fargo Bank, NA plus one or one and one-half percent to a fixed rate of five and seventy-five one hundredths percent (5.75%). PREVIOUS COUNCIL ACTION: In 2009, City Council granted the Company economic incentives in the amount of $564,000 in exchange for the creation of 40 full-time primary jobs at a distribution center and office building located at 350 Keeler Parkway in the Pueblo Airport Industrial Park. In 2013, City Council granted the Company an additional $600,000 in exchange for the creation of 30 additional full-time primary jobs at 350 Keeler Parkway. The 2013 Employment Agreement which obligates the Company to employ seventy (70) full-time employees, remains in full force and effect. In 2016, City Council approved the expansion and relocation of the Company’s distribution center and administrative offices from 350 Keeler Parkway to 1 McDonnell Douglas Street (the former “Boeing Building”) in the Airport Industrial Park. The Company agreed to hire thirty-three (33) new full-time employees (for a total of 103). Effective February 1, 2018, the City sold 1 McDonnell Douglas Avenue (n/k/a 100 Big R Street) to the Company and the City purchased 350 Keeler Parkway from the Company. On February 1, 2018, Company delivered to the City a Promissory Note in the amount of $6,856,000 with an adjustable interest rate thereon computed at the “prime rate” of Wells Fargo Bank, NA plus one percent (1%). The 02-01-18 Promissory Note obligates the Company to make monthly “interest only” payments for its ten-year term. At the conclusion of the ten-year term, the entire principal balance is due and payable by the Company to the City. In 2018, City Council approved a loan of $750,000 from the City to the Company on the following terms and conditions:  Promissory Note in the principal amount of $750,000 with an adjustable interest rate computed at the “prime rate” of Wells Fargo Bank, NA plus one and one-half percent (1.5%). The 02-12-18 Promissory Note shall obligate the Company to make principal and interest payments for its ten-year term. At the conclusion of the ten-year term, the principal balance shall be paid in full.  The interest rate shall be adjusted annually to reflect changes in the “prime rate” of Wells Fargo Bank, N.A. commencing on the first annual anniversary date of the 02-12-18 Promissory Note.  The 02-12-18 Promissory Note (like the 02-01-18 Promissory Note shall be secured by a first priority deed of trust to 100 Big R Street, Pueblo, Colorado 81001). BACKGROUND: The increases in the Wells Fargo Prime rate have made it difficult for Big R to expand its operations. The lower interest rate will allow Big R to grow its current operations. Conservatively, these interest rate savings will allow Big R to add approximately 20 full time employees to its operation over the next 2 years. This is in addition to the previously guaranteed jobs as well as the expansion of its footprint with the previous purchase of the properties located adjacent to its main facility (i.e. 32251 United Ave., Pueblo, CO 81001 and 31965 United Ave., Pueblo, CO 81001). These properties were purchased prior to the increase in the prime rates. FINANCIAL IMPLICATIONS: No additional “half cent” economic development incentives will be paid to the Company. BOARD/COMMISSION RECOMMENDATION: Not applicable to this Resolution. STAKEHOLDER PROCESS: Not applicable to this Resolution. ALTERNATIVES: Not approve this Resolution, in which case the interest rate modification would not be approved. RECOMMENDATION: Pueblo Economic Development Corporation and City administration recommend approval of the Resolution. ATTACHMENTS: None