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Home My WebLink About06/06/1995, C-5 - COLLECTION ACTION ON PROMISSORY NOTE WITH WILLIAM AND MARILYN BIRD Illlu^I ��IIIII�I� I MEETING DATE: SNI �A��, city of san OBISPO - - Y5- COUNCIL AGENDA REPORT 'TEM NUMBER: FROM: Bill Statler, Director of Finance SUBJECT: COLLECTION ACTION ON PROMISSORY NOTE WITH WILLIAM AND MARILYN BIRD CAO RECOMMENDATION Authorize the City Attorney to initiate collection action on the City's promissory note with William and Marilyn Bird. DISCUSSION Background On October 7, 1987, the City entered into a promissory note with William and Marilyn Bird in the amount of$190,000 to be paid over ten years at an annual interest rate of 9%, with the , last payment to be made on December 1, 1996 (Attachment A). The purpose of this note was to reimburse the City for the Birds'allocated share of costs for the improvements made to the Madonna Road/Highway 101 interchange in connection with the development of the Central Coast Plaza Mall. Under the terms of the note,payment was to be made as follows: Amount Due Balance Payment Date Principal Interest Total Outstanding December 1 1987 20,000 20,000 170,000 December 1 1988 20,000 15,300 35,300 150,000 December 1 1989 20,000 13,500 _ 33,500 130,000 December 1 1990 20,000 11,700 31,700 110,000 December 1 1991 20,000 9,900 29,900 90,000 December 1 1992 20,000 8,100 28,100 70,000 December 1 1993 20,000 6,300 26,300 50,000 December 1 1994 20,000 4,500 24,500 30,000 December 1 1995 20,000 2,700 22,700 10,000 December 1 1996 1 10,000 900 10,900 0 TOTAL $190,0001 .$72,9001 $262,900 $0 Current Status of the Note The City has experienced significant difficulties with collection on this note over the past five years. In terms of its current status,we have not received a principal or interest payment on this note since November 30, 1993 (at which time it was over twenty three months delinquent). Prior to the July 17, 1991 payment preceeding the last one received on November 30, 1993, the note was seven months delinquent As of May 25, 1995 the Birds owe the City$57,149 on this note calculated as follows: s ��►�I�II�IIP°S IU city of San WI S OBISPO niis COUNCIL AGENDA REPORT Due December 1,1993 Principal 20,000 Interest 6,300 Due December 1, 1994 Principal 20,000 Interest 4,500 Late charges 4,599 Plus accrued interest on late payments 1,750 Total due,May 16 $57,149 Since their first delinquency in December of 1990, the staff has worked closely with the Birds to bring their account current We have communicated with them extensively — both in person and in writing — regarding the need for them to honor their contractual obligation to the City. Based on their assurances in responding to each of our ongoing requests for payment that it would be forthcoming shortly,we have administratively extended the due date, and have not called the note nor initiated formal collection actions. On April 17, 1995,we received a formal request from the Birds to amend the terms of their note which would result in a significant deferral of principal payments (Attachment B). Staff informed Mr. Bird that formally amending the terms of the note would require Council approval and that his request would be brought forward to the Council at their June 6, meeting. However,he was also informed that the staff would not support his request, and that if payment was not made by May 25, 1995,we would recommend that the Council authorize the City Attorney to initiate formal collection action. ALTERNATIVES • Continue to administratively extend payment due dates. • Restructure the note, extending the payment term as requested by the Birds but providing for appropriate collateral/security rather than retaining its status as a simple unsecured, promissory note. Based on the delinquency history of this note and the failure of less formal approaches to bring the outstanding balance current, it is recommended that the Council authorize the City Attorney to immediately initiate formal collection action. ATTACHMENTS A. Promissory note with William and Marilyn Bird B. Request from William Bird to amend promissory note Attachmant� ._ PROMISSORY NOTE $190,000.00 October 7, 1987 San Luis Obispo, California For value received, WILLIAM L. BIRD AND MARILYN BIRD, dba SAN LUIS MALL, promises to pay to the City of San Luis Obispo, a California charter city (the "City") , at San Luis Obispo, California, the sum of One Hundred Ninety Thousand Dollars ($190 ,000.00) , with interest from December 1 , 1987, on unpaid principal at a rate of nine percent (9%) per annum; interest payable annually with principal payments; principal payable in installments of Twenty Thousand Dollars ($20,000.00) or more each, commencing on December 1 , 1987, and continuing on each December 1st thereafter until December 1 , 1997, at which time all remaining unpaid principal and accrued interest shall be due and payable, if any. Should default be made in the payment of any installment of principal or interest when due, the whole sum of principal and interest shall become immediately due at the option of the City. Principal and interest payable in lawful money of the United States. In the event any action is instituted on this note, the prevailing party in such action shall be entitled to re- covery of costs, including reasonable attorney' s fees. The undersigned specifically acknowledge the existence and creation of a municipal assessment district for the real property known as Central Coast Plaza (San Luis Mall) and hereby waive any and all right to object or protest assessments imposed by City in connection with said district to the degree that such assessments are intended to compensate City for the amount of this obligation ($190,000.00) 9 provided the assessment will be imposed only in the event the payments of this note are over thirty (30) days delinquent and the assessment will not exceed the amount then owed under this note. This note is executed in satisfaction of the obligation of the under- signed to contribute to the cost of necessary and required road improvements at the intersection of Madonna Road and U.S. 101, City of San Luis Obispo, in connection with the approval of the Preliminary and Final Development Plans for 'that project known as Central Coast Plaza (San Luis Mall) , as such obliga- tion is reflected in Resolution No. 6090 (1986 Series) of September 16, 1986, of the City Council of the City of San Luis Obispo, California. Complete or partial prepayments of principal and accrued interest may be made at any time without penalty. William L. Bird Marilyn Bird 61-5-3 Attachment A ,` W 5C Properties April 17, 1995 Mr. William Statler Director of Finance CITY OF SAN LUIS OBISPO Post Office Box 8100 San Luis Obispo, California 93403-8100 Dear Bill: This letter is in response to your March 23, 1995 letter to me regarding the bridge widening note. Considering that the original obligation between the mall and hotel has been reduced from $240,000.00 down to $70,000.00 and the hotel portion being paid off early, I would request for your consideration that we bring the interest current in the amount of$12,210.00 per your letter, the late charges be waived, and the principal balance remain at $70,000.00 for another year. As you know, we no longer own the property for which this obligation was originated, Central Coast Plaza. As I recall, the note called for this obligation to become an assessment on the property if it became delinquent. If that is still an option, it is probably the appropriate action for you to take at this time. Your assistance in this matter is appreciated. Sincerely, Williad Bird President WLB/tr 510 SOUTH 6RAN0 AVENUE SUITE 300 6LENDORA CALIFORNIA 91741 TELEPH13NE(8181 963-1505 FAX [BIB] 963-5930 4-V 0G-'02--)5 13126 a 010 7G3 5730 fe ri-crertics 02 MEET)._ _ o. AGENDA < DATE ITEM # gr COUNCIL 0 D DIR SO [M=TTEAM CAO - N DIR 5[ Properttle5 ❑ FIRE CHIEF Juno 2, I995 }TT IE1� ❑ PIN DIR Mayo Settle and City Council CLERKIOl O C3 POLICE CHF CITY OF SAN LIAS OHISPO 13REC DIR Post Office Box 8100 FILE O UTIL DIR 990 Palm Street ❑ PERS DIR San Luis Obispo,California 93403 - VIA FAX Honorable Mayor Settle and Members of the City Council: I understand you have an item scheduled on your June 6th agenda concerning the payment of a note executed by myself and Mrs. Bird dated October 8, 1987. The purpose of the note was to reimburse the city for wtdenmg the Madonna Road bridge ovdr Highway 101,which was done at the time we built Central Coast Placa There were two notes originated, diis one hieing discussed for $190,000.00 and another one for $30,000.00: We paid off the $30.000.00 note early when we sold the hotel last November, In regard to the $190,000.00 note, what is not evident by the staff report is die Nut t11at wo have raid over$170.000.00 to the city on this note to date during which time we were also struggling to subsidize a mall development we could not lease up duo to having only one department store anchor. 7be losing operations of both the mall and hotel in San Luis Obispo caused Mrs. Bird and I to commit our life earnings to sustain these properties until we lost one and sold the other at a loss. During this same period of time the city of San Luis Obispo was collecting substantial sums annually in terms of bed tax and sales tax. You should ask staff to estimate the.revenue the city has received from these two properties since 1986. The amount should exceed well over five million dollars. Even after all this we still haven't given up on San Luis Obispo. 1 have devotcd the majority of my time the past two years to bring even more sales tax to the city via the Dalidio Project. As you know, we have recently joined forces with one of the largest property owners in the country to provide the financial resources to not only complete the development, but to also assist in building a new interchange the city would like to have. In reading the staff report it appears they have little appreciation of what we have experienced in San Luis Obispo over the past seven years since we entered into this note obligation. Hopefully you telt better applcciatc uw pusitiuu A fuegivmuss of die balance outstanding may not be in your power, however an extension of time would appear reasonable under die circumstances. It is very customary in California for cities to credit sales tax revenue as an offset to this kind of obligation I would be most happy to meet with a designated member of the council on this matter at their convenience if that would be appropriate. Your accommodating consideration of this matter is greatly appreciated. Sincerely. RECE=IVED `jaV h1;a�,G JUN � 19y5 President CITY COUNCIL V&B/tr ^nil r 1. nnn ^4 910 SOUTH tiWt U AWhNUh hUllh dUU UL.hNUUHA LALWUHNIA W41 11rLFs,Hv1.i&Ir11n1 Orn Mm rAW Ir11n1 CUM.RO-In