HomeMy WebLinkAbout04/07/2009 12 CDBG Economic Development Loan Agreement with United Builders of Washington 'BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. ) Z-
•
For Meeting Of: April 7, 2009
ITEM TITLE: Consideration of a resolution authorizing the City Manager of the City of
Yakima to execute a $200,000 CDBG economic development loan agreement
with United Builders of Washington, Incorporated.
SUBMITTED BY: Michael Morales, Deputy Director CED
CONTACT: Michael Morales, Deputy Director 575 -3533
SUMMARY EXPLANATION:
United Builders of Washington, Inc. (UB) has requested a working capital loan from the city to allow
them to sustain their current workforce, and release sufficient UB capital to continue operation of the
Seasons Music Festival (Seasons). The source of funds for the loan is the city's Community
Development Block Grant Economic Development budget. The future availability of additional
CDBG funds from the American Recovery and Reinvestment Act has provided the additional
resources to make this loan possible. The allocation of funds, however, will be from the approved
2009 annual action plan and budget.
410 United Builders purchased the property located at 101 North Naches Avenue in 2005. The building
was constructed as a church in 1902, and was converted to a music performance hall, known thereafter
as The Seasons Music Festival (Seasons). Seasons was established as a philanthropic effort by.UB and
the Strohsal family to enhance and expand the musical performance market in Yakima. Seasons Music
Festival is a not for profit community arts organization that operates the facility, and UB has
subsidized this cost from the inception, including over $350,000 of investments necessary to convert
its use from church to concert venue.
CONTINUED ON NEXT PAGE
Resolution X Ordinance Contract Other:
Funding Source: CDBG. Economic Development
Approval for Submittal: �_ J—
City Ma _ er
STAFF RECOMMENDATION: Staff recommends approval of the resolution.
BOARD RECOMMENDATION: This proposal has not been formally presented to a committee
COUNCIL ACTION:
•
1
Don Boyd of Carlson, Boyd & Bailey, LLC has served as the city's legal counsel for Section 108 and
CDBG loans, and is assisting with this project. Mr. Boyd has reviewed the financial statements for UB
and the personal financial statements of the guarantors to determine if the city's risks are adequately
mitigated. In particular, Mr. Boyd will analyze whether United Builders and the guarantors possess
sufficient assets and net worth to back this loan in case of default. Mr. Boyd's opinion will be
available at the city council meeting.
Based upon the information reviewed thus far, and balanced against the city's proposed collateral
position, staff recommends approval of the $200,000 working capital loan, subject to the following
terms and conditions being agreed to and/or met prior to loan closing and fund disbursement:
1. Repayment Period: 24 months, total principal and interest due at end of term.
2. ,Interest rate: 4% - Based on prior Section 108 and CDBG Float Loans.
3. Security/collateral:
a. 1 Deed of Trust for the real property located at 101 North Naches Avenue in Yakima,
Washington (Seasons Performance Hall).
b. Any subordinate debt on the secured property must be pre- approved by the City
Manager.
c. In addition to the Loan Agreement and Promissory Note, the loan shall be evidenced by
the personal Guaranties signed by the principals of United Builders (J. Patrick Strohsal
and Steven R. Strohsal), with each member guaranteeing the full amount of the loan.
4. Clear title report
5. The borrower cannot be delinquent on any local, state or federal taxes.
6. All city, county, state and federal certificates, licenses and permits must be issued and current.
7. Liability insurance fully paid for the next year.
8. There are no material changes to the financial statements submitted for review by the City of
Yakima for United Builders of Washington, Inc. as of Oct. 31, 2008; Stephen R. Strosahl dated
November 25, 2008; and J. Patrick Strosahl dated March 13, 2009.
9. Provide for review by the City of Yakima a written appraisal report on the subject real property
effective no more than six months from the date of loan funding and showing sufficient value
to provide for full repayment of the loan
2
RECEIVED
r w - W APR 0 2 2009
�� .
!� - � �,� To: Dick Zais, City Manager CITY OF YAKIMA
G City of Yakima COMMUNITY DEVELOPMENT
,
' = .. " 129 N. 2 Street
UNITED
Yakima, WA 98901
BUILDERS April2,2009
SINCE 1 9 4 9
Dear Dick:
Pursuant to our recent conversations, this letter confirms a request from United Builders of
Washington, Inc., for a short-term loan of $200,000.00 from the City of Yakima. The need for
this loan is to provide working capital for our company to continue operations. If approved,
this financing will allow United Builders of Washington to free up resources within the
company to ensure continued operation and code compliance at The Seasons Performance
Hall. Our request is for a bridge loan to be repaid in twenty -four months or less.
As you are aware, the Seasons is a facility owned by United Builders but donated to a non-
profit organization that programs events and concerts at the hall, and has been recognized as a
key component in the downtown Yakima recovery & renaissance.
0 We have actively solicited, lender resources for the last nine months, but because credit markets
have been frozen and are particularly inaccessible for residential home construction businesses,
we have been unable to secure the capital needed to continue our home building construction
and to complete needed improvements to the Seasons facility. Over the last nine months we
have approached several lenders without success in spite of a $1.6M appraisal of the building
and no underlying debt.
With this request, United Builders of Washington acknowledges the City of Yakima's
underwriting requirements of: 1) personal guarantees from all owners of our company to repay
the City's loan; 2) collateral security provided through a first lien position in favor of the City
of Yakima on The Seasons Performance Hall property; and 3) other requirements, if any.
I assure you, Dick, that our need is real and our commitment to repay the City's loan within
twenty -four months or less is sincere. We have not, nor will we, diminish our efforts to secure
permanent financing to repay the City's loan at the earliest opportunity.
Sincere •,
gri
J. atrick Strosahl, CEO
nited Builders of Washington
0 Cc: Michael Morales, City of Yakima
2112 Nob Hill Blvd. • P.O. Box 9488 • Yakima, WA 98902 • Ph: 509-248-6321 • Fax 509- 575 -6527
*P 54£N r p, y
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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Fs
THE SECRETARY
WASHINGTON, DC 20410 -0001
CITY A 4_,
f I� It 1m,
March 6, 2009
NU, 1- t' 1
2009
The Honorable David Edler
Mayor of Yakima OFFICE C1 .�,, COUNCIL
129 North Second Street —_- -
Yakima, WA 98901
Dear Mayor Edler:
I am pleased to inform you that the U:S :Department of Housing and Urban Development
has allocated $10.1 billion, made available through the American Recovery and Reinvestment
Act of 2009 (Recovery Act) (Public Law 111 -5) signed into law by President Obama on
February 17, 2009.
This letter provides the allocations from the Recovery Act for the following programs
411 administered by the Department: Community Development Block Grants; Public Housing
Capital Fund; Lead Hazard Reduction; Section 8 Project -Based Rental Assistance; Homelessness
Prevention Fund; and Tax Credit Assistance. These programs provide funding for housing,
community and economic development, and assistance for low- and moderate - income persons
and special populations across the country.
Table 1 reflects the level of funding directly available for those programs in your
community. Table 2 identifies funding available through other partners in your community, and
finally, Table 3 identifies the allocation provided to your state for which you may apply:
Table 1- Grants awarded directly to your community
Recovery Act of 2009 Program - > , Grant Amount
Community Development Block Grant $317,515
Homelessness Prevention Fund $0
Lead Hazard Reduction $0
•
www.hud.gov espanol.hud.gov
As with all HUD Recovery Act programs, your community has HUD's commitment to be •
as flexible as possible to help communities such as yours address local needs in the most
effective manner.
I look forward to establishing a partnership to help strengthen your community for years
to come. HUD is always available to help you implement your programs effectively. If you or
your staff have any questions, please contact your local HUD Field Office.
Sincerely,
•
Shaun Donovan
1110
1111
3
411 RESOLUTION NO. R -2009-
A RESOLUTION authorizing the City Manager of the City of Yakima to execute a
Community Development Block Grant economic' development loan
agreement with United Builders of Washington, Inc. in the amount of
$200,000.
WHEREAS, United Builders of Washington, Inc., herein after referred to as "United
Builders ", is an established construction company, based in Yakima, and licensed to conduct
business in the state of Washington; and
WHEREAS, United Builders has established and subsidized a community performing
arts facility in the downtown area of the Yakima Renewal Community; and
WHEREAS, the City has received and is responsible for the administration of annual
Entitlement Grants of Community Development Block Grant ( "CDBG ") funds made available
through the United States Department of Housing and Urban Development (HUD) and
authorized by Title I of the Housing and Community Development Act of 1974, as amended;
and
WHEREAS, federal regulations governing the use of CDBG funds for special economic
development projects allow the City to use such funds as an economic incentive to provide
loans to assist private, for - profit businesses with projects that provide an appropriate level of
public benefit; and
WHEREAS, the City has determined that the CDBG assistance described below is
necessary and appropriate to ensure that United Builders continues its economic development
activities in the City of Yakima's Renewal Community Area; and
WHEREAS, the City has determined that provision of CDBG assistance would provide
substantial appropriate public benefits to the City and the Renewal Community, particularly by
retaining jobs and supporting downtown revitalization; and
WHEREAS, accordingly, the City wants to encourage United Builders , to continue such
operations in the City of Yakima's Renewal Community Area as a special economic
development project and is willing to use CDBG funds to assist United Builders through a
working capital loan of not more than $200,000 over the course of two years according to the
following terms and conditions:
1. Repayment Period: 24 months, total principal and interest due at end of term.
•
2. Interest rate: 4%
3. Security /collateral:
a. 1St Deed of Trust for the real property located at 101 North Naches Avenue in
Yakima, Washington.
b. Any subordinate debt on the secured property must be pre- approved by the City
Manager.
c. In addition to the Loan Agreement and Promissory Note, the loan shall be
evidenced by the personal Guaranties signed by the principals of United Builders
(J. Patrick Strohsal and Steven R. Strohsal), with each member guaranteeing the
full amount of the loan.
4. Clear title report
5. The borrower cannot be delinquent on any local, state or federal taxes.
6. All city, county, state and federal certificates, licenses and permits must be issued and
current.
7. Liability insurance fully paid for the next year.
8. There are no material changes to the financial statements submitted for review by the
City of Yakima for United Builders of Washington, Inc. as of Oct. 31, 2008; Stephen R.
Strosahl dated November 25, 2008; and J. Patrick Strosahl dated March 13, 2009.
9. Provide for review by the City of Yakima a written appraisal report on the subject real
property effective no more than six months from the date of loan funding and showing
sufficient value to provide for full repayment of the loan; and
WHEREAS, the City Council deems it to be in the best interest of the City to authorize
execution of a CDBG economic development project loan agreement with United Builders, now,
therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA:
The City Manager of the City of Yakima is hereby authorized and directed to execute a
CDBG economic development project loan agreement with United Builders in the amount of
$200,000 to retain their economic development activity in the City of Yakima's Renewal
Community Area. The City Attorney shall approve the final form of the Agreements.
ADOPTED BY THE CITY COUNCIL this 7th day of April, 2009.
David Edler, Mayor
AI EST:
1111
City Clerk
411 MEMORANDUM
DATE: April 3, 2009
TO: The Honorable Mayor and City Council
FROM: Dick Zais, City Manager
Rita DeBord, Finance Director
Cindy Epperson, Deputy Director - Acct /Bud
RE: 2009 Mid -Year Administrative Budget Reductions
The nation is currently experiencing a rather broad, deep recession. Although Yakima has not
been negatively affected to the extent of some areas, we are seeing a, downturn in some of the
General Government revenues. Several revenue sources are trending to come in below 2009 budget
estimates, as follows:
General Government
➢ Sales Tax (General and Criminal Justice) trending at (4 %) ($660,000)
® > Building Permits — about (25 %) (200,000)
➢ Gas Tax (150,000)
> Interest Earnings /Other (100,000)
Total ($1,100,000)
In response to this anticipated reduction in General government revenue, the City Manager directed
Department Heads to reduce their 2009 Budget. The total targeted reduction for tax - supported
funds (General Government) is currently 2% of the 2009 budget or approximately $1.1 million.
Additionally, $570,000 of budget reductions are being implemented in the Transit budget and in
REET I and REET II related expenditures, for a total budget reduction of $1,670,000.
The Department Directors were tasked to submit recommendations for budget reductions that meet
or exceed the targeted departmental goals. The City Manager emphasized that budget reductions
should be structured to minimize the impact on services to our citizens while maintaining the
Council's strategic priorities.
The reductions are being implemented administratively by staff at this time to maintain the relative
balance between revenue and expenditures as was authorized by Council in the adopted 2009
Budget. Should Council wish to discuss any of these administrative budget reductions, staff is
prepared to meet with Council at your request.
0
CITY OF Y ua2
® 2009 MID - YEAR BUDGET REDUCTION OPTIONS
•
GENERAL GOVERNMENT FUNDS '
ELIGIBLE PROPOSED % OF
FUND /DEPARTMENT BUDGET REDUCTIONS BUDGET
Police $22,434,616 $302,000 1.3%
Municipal Court 1,321,305 0 (1)
Fire 8,909,316 65,000 0.7%
Public Works - Street & Traffic Operations 6,027,465 255,000 4.2%
Public Works Parks & Recreation 4,37Z544 176,500 4.0%
Finance 4,394,538 115,000 2.6%
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Community & Economic Development 4,350,781 14Z100 4.9%
City Management / Legal 3,452,894 174,000 5.0%
Travel / Training (Appox. 5% of Non - mandatory) 7,500
TOTAL (2) • . $55,268,459 $1,234,600
II TARGETED BUDGET REDUCTION (2 %) $1,106,000
OTHER FUNDS
PROPOSED
FUND /DEPARTMENT REDUCTIONS
REET I (3) $150,000
REET II (4) 150,000
Transit - Fuel Price Reduction (5) 270,000
TOTAL $570,000 •
(1) No reductions are proposed in Municipal Court at this time. They are fully staffed, and contributed a position (Deputy
Court Services Manager) in the first round of reductions at the time of Budget Wrap -up. The Court will work with
Police and Prosecution to try to achieve the reductions identified in the Police budget for Yakima County jail costs. The
$302,000 of reductions identified in the Police budget covers both the Police and Municipal Court targets.
(2) The total General Government adopted budget for 2009 is $60,778,959. This consists of the $55,268,458 eligible for
reductions plus $5,510,500 of fixed non - discretionary costs. Non - discretionary / mandated costs include: Police
Pension, Indigent Defense, State Examiner, Debt Service, District Court and Utility Customer Services which is
. supported by Enterprise Funds.
(3) REET I: The anticipated reductions in revenues will decrease resources available for the capital projects.
(4) REET II: With the significant reduction in Real Estate Excise Taxes (about 1/3 reduction over the last 5 months since
October, 2008), the Street preservation program is proposed to be reduced in order to ensure sufficient revenue is
® available to meet debt service obligations. (This is not included in the General Government budget, but directly
effects street maintenance.), •
(5) The anticipated reduction in Transit Sales Tax of 4% is about $253,000. The savings expected to be realized because of
the reduction in fuel prices is about $270,000, therefore, no service reductions are being planned for Transit at this time.
2009 Budget Reductions —1
•
QTY OF
0 2009 MID YEAR BUDGET REDUCTION
POLICE
-- - - -- PERSONNEL CHANGES - ---- -- - CAPITAL OUTLAY / MAINT I OP COSTS -
ITEM DIVISION / $ COST $ COST
# Svc UNIT DESCRIPTION REDUCTION DESCRIPTION REDUCTION ITEM DESCRIPTION
Preventative Patrol
1 113 Fuel savings $110,000 Price reduction
Support Services
1 114 Hold Police Service $32,000
Specialist 1 vacancy -
9 months
Administration
1 119 Reduce jail costs - 150,000 Work w /County Corrections and
Yakima County Municipal Court to reduce outside jail
costs
2 119 Professional services 10,000 Defer training on Police and
procedure manual until 2010
TOTAL $32,000 TOTAL $270,000
110 POLICE GRAND TOTAL $302,000 SEE MUNICIPAL COURT BELOW
MUNICIPAL COURT
No reductions are proposed in Municipal Court at this time. They are fully staffed, and contributed
a position (Deputy Court Services Manager) in the first round of reductions at the time of Budget
Wrap -up. The Court will work with Police and Prosecution to try to achieve the reductions
identified in the Police budget for Yakima County jail costs. The $302,000 of reductions identified in
the Police budget applies to both Police and Municipal Court.
•
2009 Budget Reductions — 2
CITY OF d./Wit
0 2009 MID YEAR BUDGET REDUCTION
FIRE
-- -- ---- PERSONNEL CHANGES - - - - - -- - CAPITAL OUTLAY / MAINT / OP COSTS -
ITEM DIVISION / $ COST $ CoST
# SVC UNIT DESCRIPTION REDUCTION DESCRIPTION REDUCTION ITEM DESCRIPTION
Fire Suppression
1 122 Eliminate Firefighter $5,000 Fully staffed - no recruiting expenses
(FF) entrance exam for anticipated
2009
2 122 Eliminate recruit FF $29,000 Reduction in professional services
academy for 2009
3 122 No new hires planned 8,000 No Pre - employment physical exams
for 2009
4 122 Fuel savings 21,000 Price reduction
Fire Training
5 125 Eliminate recruit FF 2,000 Reduction in training overtime
academy for 2009
TOTAL $31,000 TOTAL $34,000
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FIRE GRAND TOTAL $65,000
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O
2009 Budget Reductions — 3
CITY OF /
0 2009 MID -YEAR BUDGET REDUCTION
STREETS & TRAFFIC
-- - ----- PERSONNEL CHANGES o - - - -- - CAPITAL OUTLAY / MAINT / OP COSTS -
ITEM DIVISION / $ COST $ COST
# SVC UNIT DESCRIPTION REDUCTION DESCRIPTION REDUCTION ITEM DESCRIPTION
Pedestrian & Bikeway Maintenance
1 522 County DOC Crew 53,000 End Department of Corrections
(8 months elimination) (DOC) contract in May, 2009.
Reduced sidewalk cleaning and weed
abatement activities, some work to be
absorbed by existing crews.
Traffic Engineering
1 526 Supervising Traffic 95,000 Reduced traffic analysis capacity.
Engineer (10 months Duties to be absorbed by new
Vacancy 2009) Division Manager.
2 525 Sign and Lines 67,000 Supervisory duties reassigned
Supervisor (10 month internally
vacancy in 2009)
Department Wide
1 141 Fuel savings $40,000 Price reduction
TOTAL $162,000 TOTAL $93,000
STREETS GRAND TOTAL $255,000
REET 2111
1 Reduce Street $150,000 Supplies: $100,000
Preservation program Equipment Rental: $50,000
(1) REET 2 - With the significant reduction in Real Estate Excise Taxes (about 1/3 reductions over the last 5 months
since October, 2008), the Street preservation program is proposed to be reduced in order to ensure sufficient revenue
is available to meet debt service obligations. This is not included in the General Government budget, but directly
effects street maintenance.
0
2009 Budget Reductions — 4
CITY OF Ydraittit
S 2009 MID YEAR BUDGET REDUCTION
PARKS AND RECREATION .
•
-- - - - --- PERSONNEL CHANGES -- - - -- - CAPITAL OUTLAY / MAINT / OP COSTS -
ITEM DIVISION / $ COST $ COST
# SVC UNIT DESCRIPTION REDUCTION DESCRIPTION REDUCTION ITEM DESCRIPTION
Park Maintenance
1 421 • Unfilled Vacancy - $50,000 Salary + Benefits
Park Maintenance
Specialist •
2 421 • County DOC Crew $53,000 End Department of Corrections
(8 months elimination) (DOC) contract in May, 2009.
Reduced sidewalk cleaning and weed
abatement activities, some work to be
absorbed by existing crews.
3 421 Park Trees 7,500 Reduce Tree maintenance amount
4 421 WV Park - cleaning 20,000 End Cleaning Contract in May -
Maint to do cleaning
"Aquatics
1 424 Extend Lions Pool 7,500 Extend maintenance down time from
service / maintenance 1 week to 2 weeks
•
temporary closure one
extra week (2 weeks
total) in August
Grants Sponsorships & Contributions
1 427 Americorp 15,000 Replace AmeriCorps program w/
Yakima Parks programs
Administration
1 429 Fuel cost savings 12,000 Price reduction
2 Parks allocation of 11,000
Department Assistant
IV vacancy
TOTAL $68,500 TOTAL $107,500
PARKS GRAND TOTAL $176,500
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O
2009 Budget Reductions — 5
•
•
•
QTY OF id20L2
/a 2009 MID YEAR BUDGET REDUCTION
FINANCE
•
-- - --- -- PERSONNEL CHANGES -- --- - -- - CAPITAL OUTLAY / MAINT / OP COSTS -
ITEM DIVISION / $ COST $ COST •
# SVC UNIT DESCRIPTION REDUCTION DESCRIPTION REDUCTION ITEM DESCRIPTION
Information Systems
1 052 Reduce temporaries $35,000 Extend installation times
assigned for Police
vehicle electronics
installations
2 052 Reduce computer 50,000
equipment /
replacement
3 052 PC Software 5,000
4 052 Print shop equipment
replacement 15,000
5 052 Graffiti data base 5,000 Include in grant
6 052 Pacific Power 5,000 Variable
Maintenance
TOTAL $35,000 TOTAL $80,000
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FINANCE GRAND TOTAL $115,000
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• 2009 Budget Reductions — 6
• CITY OF /aiU/LL2
0 2009 MID YEAR BUDGET REDUCTION
COMMUNITY & ECONOMIC DEVELOPMENT
- -- ---- PERSONNEL CHANGES - - - - -- • CAPITAL OUTLAY / MAINT / OP COSTS -
ITEM DIVISION / $ COST $ COST
# SVC UNIT DESCRIPTION REDUCTION DESCRIPTION REDUCTION ITEM DESCRIPTION
Planning
1 021 Reduce overtime $5,000 Planning Division is fully staffed
Code Administration
1 022 Transfer Dangerous $10,000 Abatement within CDBG boundaries
Building Abatement to is eligible for Grant reimbursement •
ONDS
2 022 Fire Code Inspector 58,000 Duties to be absorbed by existing staff
vacancy - 9 months
Engineering
1 041 Freeze vacant 34,500 Also will result in savings to Utilities
Engineering Office
Assistant - 9 months
(GF only)
2 041 3 month vacancy and 22,100
underfill - Project
Engineer
3 041 Reduce retirement 7,500
cashouts
Department Wide
1 !Fuel savings 10,000
TOTAL $127,100 TOTAL $20,000
CED GRAND TOTAL $147,100
2009 Budget Reductions — 7
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QTY OF /AUKIG
0 2 009 MID -YEAR BUDGET REDUCTION
CITY MANAGEMENT / LEGAL
•
---- -- PERSONNEL CHANGES - ---- -- - CAPITAL OUTLAY / MAINT / OP COSTS -
ITEM DIVISION / $ COST $ COST
# SVC UNIT DESCRIPTION REDUCTION _ DESCRIPTION REDUCTION ITEM DESCRIPTION
Legal Counsel .
1 622 Assistant City $27,600 Annual salary & benefits: $110,400
Attorney II - 3 month
vacancy
Shift 50% of 9 months 41,400 Shift 50% of compensation package to
to Risk Management Risk Management Fund, and reduce
Fund RM outside Professional Services by
this amount
2 622 Senior Assistant City 61,000 Annual Salary & Benefits: $122,000
Attorney I - 6 month
vacancy
Shift 50% of 6 months 31,500 Shift 50% of compensation package to
to Risk Management Risk Management Fund, and reduce
Fund RM outside Professional Services by
this amount
II City Administration Divisions: Human Resources, City Manager, City Clerk, Purchasing
1 Reduce Temporaries/ 5,000
Overtime
2 Reduce Supplies, $7,500
Prof: Services, etc.
TOTAL $166,500 TOTAL $7,500
CITY MGMT GRAND TOTAL $174,000
Note: 2009 effect on Risk Management budget is an increase . in salaries of $72,900 and a reduction in outside Professional
Services from $150,000 to $77,100. The annualized effect is a transfer of $116,200 from General Fund to Risk
Management Fund.
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2009 Budget Reductions — 8
• •
ADDRESS:
230 S. 2 "° STREET DONALD A. BOYD
YAKIM.A, WASHINGTON E -Mail: dboydPcbhlawlirm.a,m
98901
TELEPHONE: Carlson Bo & Bailey _
509.834-6611 J y _
Attorneys at Law `
FACSIMILE:
509.834-6610
•
WEB SITE:
www.cbblawfirm.com
April 7, 2009
Mr. Richard A. •Zais, Jr.
City Manager
City of Yakima
129 North 2 Street
Yakima, Washington 98901
•
Re: City of Yakima Office of Neighborhood Development Services
CBDG Loan to United Builders of Washington, Inc.
Dear Mr. Zais:
•
We have acted as counsel to The City of Yakima Office of Neighborhood
Development Services (Client) who is acting as the lender in connection with
that certain loan to United Builders of Washington, Inc., Borrower in the
amount of $200,000.00 (the "Loan "). As used herein, the term "Borrower"
shall collectively refer to the following: United Builders of Washington, Inc.,
Stephen R. Strosahl and Geanette L. Strosahl, husband and wife; and J.
Patrick Strosahl and Judith L. Strosahl, husband and wife, who are personal
•
guarantors to Loan.
We render this opinion letter to you at the request of Client.
A. Loan Documents and Matters Examined
In rendering our opinion, we have examined originals, or copies identified to
our satisfaction as true copies of the originals of the following documents:
A -1 Compiled Financial Statement of United Builders of
Washington, Inc. dated October 31, 2007;
A -2 Draft Financial Statement of United Builders of Washington,
Inc. dated October 31, 2008;
r
Mr. Richard A. Zais, Jr.
April 7, 2009
Page2of6
A -3 Filed federal corporate income tax return for the years 2006 and
2007 for United Builders of Washington, Inc.;
A -4 Signed Financial Statements for Stephen R. Strosahl and
Geanette L. Strosahl dated May 31, 2007, April 24, 2008 and
November 25, 2008;
A -5 Filed individual federal income tax returns for Stephen R.
Strosahl and Geanette L. Strosahl for the years 2006 and 2007;
A -6 Signed Financial Statement for J. Patrick Strosahl and Judith
L. Strosahl dated March 13, 2009;
A -7 Filed individual federal income tax returns for J. Patrick
Strosahl and Judith L. Strosahl for the years 2006 and 2007.
The documents listed in Items A -1 through A -7 above are collectively referred
to herein as the "Financial Documents ".
As to all matters of fact bearing on the opinions expressed herein, we have
relied on: (i) the statements made by the officers and representatives of
Borrower and (ii) the truthfulness and current validity of all financial
statements made in the Financial Documents.
B. Assumptions
For purposes of this opinion letter, we have relied on customary assumptions,
as well as certain assumptions peculiar to Washington law, including the
following assumptions:
B -1 The Loan is primarily for commercial or business purposes, and
not for personal family or household purposes, within the
meaning of Revised Code of Washington (RCW ") 19.52.080.
B -2 The real property in which the Lender is to acquire a security
interest for the Loan (the "Collateral ") is not used primarily for
personal, family or household purposes.
B -3 The Collateral is appraised at a value sufficient to fully repay
the Loan.
B -4 All conditions precedent to closing the Loan have been satisfied
or waived.
•
Mr. Richard A. Zais, Jr.
April 7, 2009
Page3of6
B -5 The assumptions contained in Section 4 of the Legal Opinion
Accord of the ABA Section of Business Law (1991) (the
"Accord ").
B -6 The proper filing and recording of legal documents sufficient to
provide Client with a first priority lien against the real property
is made with the Yakima County Auditor.
B -7 All of the collateral is located in Washington State where
perfection is dependent on the legal description, that the correct
legal description is used in the Loan Documents;
B -8 The delivery to, or for, the benefit of the Borrower at closing of
the funds to be loaned pursuant to the Loan;
B -9 The due delivery to the Lender of the Loan documents, and the
due execution of all unsigned documents;
B -10 The parties will exercise their rights and remedies and make all
determinations under the Loan documents and related
documents in good faith and in a commercially reasonable
manner; and,
B -11 Lender will exercise control over any collateral requiring such
for proper perfection.
Whenever a statement herein is qualified by the phrase "to our knowledge,"
or by any other similar phrase, or where it is noted that nothing has been
brought to our attention, it means that the opinion stated is based solely on
the conscious awareness of information by one of the following persons as to
the matters being opined on: (i) the attorney who signs this opinion letter, (ii)
any attorney at our firm who has been actively involved in preparing any
Loan documents, or preparing this opinion letter, and (iii) solely as to
information relevant to a particular opinion issue or confirmation regarding a
particular factual matter (e.g., pending or threatened legal proceedings), any
attorney at our firm who is primarily responsible for providing the response
concerning that particular opinion issue or confirmation.
Except for the limited examination of the Financial Documents themselves,
we have not undertaken an independent investigation to determine the
accuracy of the matters covered by the Financial Documents or any
statements made by the Borrower and any limited inquiry undertaken by us
during the preparation of this opinion letter should not be regarded as such
an investigation. No inference as to our knowledge of any matters bearing on
Mr. Richard A. Zais, Jr.
April 7, 2009
Page 4 of 6
the accuracy of the facts underlying any such statement should be drawn
from the fact of our representation of the Client. We are not certified
accountants and make no opinion as to the meaning or import of any
financial terms.
C. Opinions
Based on the foregoing examinations and assumptions and subject to the
qualifications, limitations and exclusions stated below, we are of the opinion
that:
C -1 The Balance Sheet of United Builders of Washington, Inc. dated
October 31, 2008 shows a stated positive net worth in an amount
which would indicate it probably has sufficient net worth to
satisfy payment of the obligations of the Loan by sale of assets
or other payment, if necessary, based on the fact that the asset
values expressed represent fair market value and not a lesser
value. This is measured only as of the date of October 31, 2008.
C -2 The Financial Statement of Stephen R. Strosahl and Geanette L.
Strosahl dated November 25, 2008 shows a stated positive net
worth in an amount which would indicate it probably has
sufficient net worth to satisfy their payment guaranty
obligations of the Loan by sale of assets or other payment, if
necessary, based on the fact that the asset values expressed
represent fair market value and not a lesser value. This is
measured only as of the date of November 25, 2008.
C -3 The Financial Statement of J. Patrick Strosahl and Judith L.
Strosahl dated March 13, 2009 shows a stated positive net worth
in an amount which would indicate it probably has sufficient net
worth to satisfy their payment guaranty obligations of the Loan
by sale of assets or other payment, if necessary, based on the
fact that the asset values expressed represent fair market value
and not a lesser value. This is measured only as of the date of
March 13, 2009.
D. Qualifications
The opinions set forth herein are subject to customary qualifications, as well
as qualifications specific to Washington laws, some of which are noted below:
Mr. Richard A. Zais, Jr.
April 7, 2009
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D -1 The effect of bankruptcy, insolvency, reorganization,
receivership, moratorium, fraudulent transfer and other similar
laws affecting the rights and remedies of the creditors generally,
and the effect of general principles of equity, whether applied by
a court of law or equity.
D -2 Without limiting the other qualifications set forth in this opinion
letter, certain provisions contained in the Loan documents may
be limited or rendered unenforceable by applicable law, but in
our opinion such law does not make the remedies afforded by the
Loan documents inadequate for the practical realization of the
principal benefits intended to be provided.
D -3 The Other Common Qualifications set forth in Section 14 of the
Accord.
E. Exclusions
The opinions set forth herein are subject to customary exclusions, including
the following matters as to which we express no opinion:
E -1 The priority of any lien or security interest.
E -2 The laws, regulations and requirement identified in Section 19
of the Accord., except for Section 19(h) of the Accord, as it relates
to a security interest in personal property.
E -3 Any changes to the Financial Documents from the effective date
of such documents.
Regardless of the states in which members of this firm are licensed to
practice, our opinion is limited to the laws of Washington and to federal laws
of the United States of America.
This opinion is rendered as of the date set forth above, and we disclaim any
obligation to advise you of any changes in the circumstances, facts, laws, or
events that may occur after this date or to otherwise update this opinion,
even though the changes may affect the legal analysis, legal conclusion or
information confirmed in this opinion letter.
This opinion has been rendered to you in connection with the transaction
described herein solely for your information and is not to be quoted in whole
or in part or otherwise referred to, used, or relied upon by any person or
entity other than you, without our prior written consent. This opinion letter
Mr. Richard A. Zais, Jr.
• April 7, 2009
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shall be interpreted in accordance with Washington State third -party legal
opinion practice.
•
_Very truly yours,
•
Donald A. Boyd
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