BURBANK REDEVELOPMENT AGENCY

Tuesday,  October 7, 2003

AGENDA

CITY COUNCIL CHAMBER - 275 EAST OLIVE AVENUE

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CLOSED SESSION IN CITY HALL BASEMENT LUNCH ROOM/CONFERENCE ROOM:

Conference with Real Property Negotiator:

Pursuant to Govt. Code �54956.8

Agency Negotiator:  Assistant Executive Director/Susan Georgino

Property:  415 Front Street (APN 2449-036-904), Remnant High Rail Parcel (APN 2449-037-902), Vacated Portion of Front Street.

Parties with Whom City is Negotiating:  Bert Boeckmann and the Ford Motor Company.

Name of Contact Person:  Jack Lynch, Senior Redevelopment Project Manager.

Terms Under Negotiation:  Sale of property.

                                                                      6:30 P.M.

INVOCATION:           *

The Courts have concluded that sectarian prayer as part of City Council meetings is not permitted under the Constitution.

FLAG SALUTE:

ROLL CALL:

REPORT TO THE AGENCY:

        1.   SECOND AMENDMENT TO THE BUILDING REHABILITATION AGREEMENT BETWEEN CINNABAR, INC. AND THE CITY OF BURBANK REDEVELOPMENT AGENCY:

The purpose of this memorandum is to provide information to the Redevelopment Agency Board (Agency) to consider granting a second amendment to the Building Rehabilitation Agreement (Agreement) between Cinnabar, Inc. and the Agency.

On September 24, 1996, the Agency approved a $200,000 Agreement with Cinnabar Inc., an entertainment construction company.  The Agreement is a ten-year, six percent interest loan that was granted for the purpose of rehabilitating the property at 2940 North Hollywood Way.

Under the terms of the Agreement, the annual payment of $26,644.92 would be forgiven if local sales tax of at least $26,644.92 was achieved each year with additional requirements of continuous occupancy, the continuous employment of no less than 100 full-time employees, and a continuous leasing condition. 

For the first three years of the Agreement, Cinnabar, Inc. exceeded its targets each year.  However, for Fiscal Year (FY) 1999-00, Cinnabar, Inc. failed to meet the requirements of the Agreement.  Local sales tax generated by Cinnabar, Inc. for this period amounted to $18,030.00, thereby missing the threshold by $8,614.92.  At the Agency meeting of February 19, 2002, the Agency approved a five-year, $1,998.60 annual payment plan, providing Cinnabar, Inc. with an extended period of time to meet the $8,614.92 obligation.

For FY 2000-01, Cinnabar, Inc. met the obligations, the annual payment was forgiven, and the first payment of the five-year payment plan of $1,998.60 was received.  However, for FY 2001-02, Cinnabar, Inc. failed to meet both the continuous employment condition and the minimum sales tax condition.  FY 2002-03 ended on September 30, 2003 and compliance with the conditions of the Agreement has yet to be confirmed.  Agency staff has been informed that the nature of the Cinnabar, Inc. business had changed due to the significant effects of runaway production coupled with the current economic downturn.  Cinnabar, Inc. also stated that downsizing of the business would be required to ensure its continued existence, and has requested a second amendment to the Agreement. 

Given the state of the business and the company�s recent performance, in all likelihood, Cinnabar, Inc. would continue paying the annual payments of $26,644.92 unless a substantial amendment is made to the Agreement.  In addition, as the annual payment for FY 2001-02 has not been received, Cinnabar, Inc. is now officially in default of the Agreement and the principal balance of $120,326.64 is now due and payable.

If an amendment to the Agreement is approved, staff recommends including the existing conditions and requirements, in addition to the following terms:

�        The use of the existing loan balance of $120,326.64, as the principal of a new ten-year, three percent interest loan.  This loan would yield annual payments of $13,942.56.

�       

      The loan would be secured with a lien against the property located at 2940 North Hollywood Way.

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     In order for an annual payment to be forgiven, the existing conditions for forgiveness will continue to apply, which include the continuous employment condition of 100 full time employees, the leasing condition, and the minimum sales tax condition of $26,644.92.  Each condition must be met for the forgiveness of the annual payment of $13,942.56.

�        In the event that Cinnabar, Inc. fails to meet sales tax requirements and the sales tax generated is less than the minimum sales tax amount, but the other conditions of the Agreement have been met, payment shall be calculated as the lesser of: 1) the difference between the actual sales tax receipts paid to the State and the minimum sales tax amount; or, 2) the new annual payment of $13,942.56.

As conveyed by Cinnabar, Inc. representatives, the operation of Cinnabar, Inc. is downsizing and, as such, the business is having difficulty meeting obligations to the Agency.  The terms for an amendment as outlined in this report would essentially reduce the annual payments, but would maintain the existing conditions for the forgiveness of an annual payment.  The proposed amendment provides a vehicle for Cinnabar, Inc. to meet the obligations to the Agency in the form of a low-interest rate loan that is approximately half of the existing annual payment.  However, if an amendment is not granted, the loan is now in a position where it needs to be called.  The proposed amendment would protect the interests of the Agency by maintaining the intentions of the original Agreement and would promote the goals of the Agency by supporting a local business thereby enhancing economic development in the community.

The proposed Resolution will have no fiscal impact to the Agency. 

Recommendation:

Adoption of proposed resolution entitled:

A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK APPROVING A SECOND AMENDMENT TO THE BUILDING REHABILITATION AGREEMENT BETWEEN THE AGENCY AND CINNABAR, INC.

RECESS to conclude the City Council meeting.

ADJOURNMENT.