HomeMy WebLinkAboutHumane Society-Redmond NotesDeschutes County Board of Commissioners
1300 NW Wall St., Suite 200, Bend, OR 97701-1960
(541) 388-6570 - Fax (541) 385-3202 - www.deschutes.org
AGENDA REQUEST & STAFF REPORT
For Board WORK SESSION of December 1, 2010
Please see directions for completing this document on the next page.
DATE: November 22, 2010
FROM: Dave Kanner Administrator ext. 6565
TITLE OF AGENDA ITEM:
Consideration and approval of documents 2010-698 and 2010-699, amending the promissory note and
establishing a new optional advance note for the Rehabilitation Loan Agreement with the Humane
Society of Redmond.
PUBLIC HEARING ON THIS DATE? No.
BACKGROUND AND POLICY IMPLICATIONS:
In 2008, Deschutes County entered into a Rehabilitation Loan Agreement (RLA) with the Humane
Society of Redmond (RHS) under which the County satisfied in full the long-term outstanding debt of
RHS and the Humane Society agreed to repay this loan at 3.9% interest, using the proceeds of trusts in
which RHS was named as a beneficiary. At the time, the 3.9% interest seemed extremely generous, as
it was actually about 100 basis points below what the County was earning on its investments. Shortly
after entering into the loan agreement, however, financial markets collapsed, causing a sharp decline in
interest rates. Today, the County is earning 1.16% on its investments; far less than what we are
charging RHS on its loan. It has never been our intent to make money on the RHS loan. As such, staff
recommends modifying the RLA and attendant promissory notes to charge a floating interest rate tied to
the County's average rate of return on its investments. This change is prospective and does not affect
any interest paid to date.
In addition, the RLA included an Optional Advance Note (OAN) that has functioned for RHS as a line
of credit for covering short-term operating deficits. Under the original OAN, RHS could request up to
$8,333 no more than once every 30 days, up to $100,000 total. As money is drawn from the OAN, the
amount is added to the balance owed under the RLA. RHS has now drawn the maximum available to
them under the OAN but continues to experience cash shortages, most recently due to the confluence of
a three -pay -period month and an overabundance of cats in the shelter. (RHS has since adopted a policy
that limits the number of cats it will shelter at any given time.) This resulted in a significant cash
shortfall and aged accounts payables, some of which are essential to shelter operation. Staff proposes
establishing a second Optional Advance Note, again in the maximum amount of $100,000, to get the
RHS through this current cash shortage as well as future cash shortages.
The new RHS thrift store is making money, as are their RV storage lot and the event center.
The long-term prognosis for RHS remains good, particularly if they can get through this short-term
cash flow problem.
FISCAL IMPLICATIONS:
These proposed changes are budget neutral, as the interest we will charge on the loan will be the same
as what we are earning on other investments, and any funds borrowed under the new OAN will be
repaid along with other loan funds.
RECOMMENDATION & ACTION REQUESTED:
Staff recommends Board approval of documents 2010-698 and 2010-699, amending the promissory
note and establishing a new optional advance note for the Rehabilitation Loan Agreement with the
Humane Society of Redmond.
ATTENDANCE: Dave Kanner, County Administrator
DISTRIBUTION OF DOCUMENTS:
Dave Kanner
Marty Wynne, Finance Director
PROMISSORY NOTE
[Amendment]
DATE: December 1, 2010
PROMISOR: Humane Society of Redmond, an Oregon non-profit corporation.
1355 NE Hemlock Avenue
Redmond, OR 97756
PROMISEE: Deschutes County
1300 NW Wall Street
Bend, OR 97701
Recitals
Promisor has three existing Notes: an Optional Advance Note, and two Promissory Notes, (herein
collectively, the "Notes") all dated December 9, 2008 pursuant to which Promisor is obligated to
repay Promisee all funds furnished by Promisee to Promisor plus interest at 3.9% per annum on
or before December 1, 2015. Promisor has requested that Promisee agree to amend the Notes to
provide an interest rate that reflects more closely current market rates for such instruments.
Promisee has agreed to amend the Notes as requested and as more specifically set forth herein.
Terms
The Notes, dated December 9, 2008 are hereby amended as follows:
The interest to be applied to the outstanding balance, including accrued and unpaid interest to the
effective date of this Promissory Note Amendment shall accrue at the County's actual monthly net
earnings rate, compounded monthly.
The effective date for calculation of the revised interest rate shall be December 1, 2010.
Except as otherwise expressly provided herein, the Notes shall remain in full force and effect.
REDMOND HUMANE SOCIETY, Promisor
By
, President
Attest:
, Secretary
Promissory Note (Amendment) Page 1 of 1 Pages
OC -2010-698
OPTIONAL ADVANCE NOTE
[Secu red]
DATE: December 1, 2010
PROMISOR: Humane Society of Redmond, an Oregon non-profit corporation.
1355 NE Hemlock Avenue
Redmond, OR 97756
PROMISEE: Deschutes County
1300 NW Wall Street
Bend, OR 97701
ON DEMAND, or if no demand is sooner delivered, then, on December 1, 2015, Promisor
promises to pay to Promisee, or order, the maximum principal sum of ONE HUNDRED
THOUSAND and no/100ths Dollars ($100,000.00), or so much of said principal sum as may be
now and at anytime hereafter be advanced and outstanding, in lawful money of the United States
of America, together with interest on the unpaid and outstanding principal balance of such, and
each of such, advances. Unless otherwise directed by or on behalf of Promisee, all payment shall
be addressed or delivered to the Deschutes County Finance Department, Deschutes Services
Building, at the above address.
On, and after, the date of this Note, until: (a) the maximum principal sum stated above shall
have been advanced, or (b) until such time as the entire amount of principal and interest shall be
due and payable in full according to the terms of this Note, or the terms and provisions of that
certain Rehabilitation Loan Agreement between Promisor and Promisee dated and effective as of
December 1, 2008, as the same may be amended, if at all, in accordance with its terms,
whichever first occurs, Promisor shall have the right and option to request, and Promisor shall,
advance hereunder, such sum as may be stated in a written request for such advance,
countersigned on behalf of Promisee by its President and by its Treasurer, that is delivered to
Promisee in care of its County Administrator, at the address stated above.
Provided, however, that no such optional advance: (a) shall exceed the sum of eight thousand
and five hundred dollars ($8,500) unless approved, in writing, by or on behalf of said County
Administrator; (b) may be requested, or delivered, if, at the time of such request, Promisee has
failed to deliver any financial reports, schedules or other information required of it under the said
Rehabilitation Loan Agreement, or is otherwise in breach or default under that, or any other
"Related Document" described in the said Rehabilitation Loan Agreement, or may be requested,
or delivered, if the amount of any such advance would cause the total principal amount advanced
and then -outstanding and unpaid under this Note to exceed the maximum principal sum stated
above.
Interest on the unpaid balance of each advance under this Note shall be calculated and
payable at the County's actual monthly net earnings rate, compounded monthly.
Promisor acknowledges, confirms and agrees that interest will be computed and may be
accrued, in accordance with the foregoing provisions of this Note, prior to the date payment is due
and payable under this Note, or the above-mentioned Rehabilitation Loan Agreement. Promisor
agrees that all sums paid to, or received or recovered by, Promisee on account of the
indebtedness evidenced by this Note shall first be applied to the payment and satisfaction of
Promisor's obligation for the payment of interest hereunder and then to reduction of the principal
Optional Advance Note (Secured) Page 1 of 3 Pages
OC -2010-699
amount of said indebtedness without regard to any contrary characterization or designation of
such payment or any portion thereof by or on behalf of the Promisor. Accordingly, unless and
until such time as Promisor shall have paid an amount equal to all interest computed and accrued
as aforesaid, no payments made by or on behalf of the Promisor shall be applied to reduce the
principal amounts payable hereunder.
All or any portion of the indebtedness evidenced hereby may be prepaid at any time without
penalty or surcharge of any kind or description.
1. Acceleration.
If any payment due on account of interest or principal payable hereunder is not paid when due,
the whole sum of both principal and interest shall become immediately due and collectible at the
option of the Promisee. If Promisor abandons, terminates or ceases operations as an animal
shelter on the Property located at the above address, Promisee may exercise its option to
accelerate payment of this Note upon such occurrence or default by Promisor regardless of any
prior forbearance. Otherwise, and in addition, Promisee may exercise its option to accelerate
payment of this Note if and when such right or option shall be afforded Promisee under the above-
mentioned Rehabilitation Loan Agreement, as the same may be amended in accordance with its
terms.
2. Disputes. With respect to any dispute relating to this Note, or in the event that a suit, action,
arbitration, or other proceeding of any nature whatsoever, including, without limitation, any
proceeding under the U.S. Bankruptcy Code and involving issues peculiar to federal bankruptcy
law, or any action seeking a declaration of rights, is instituted to interpret or enforce this Note or
any provision of this Note, the prevailing party shall be entitled to recover from the losing party its
reasonable attorneys' fees and all other fees, costs, and expenses actually incurred and
reasonably necessary in connection therewith, as determined by the judge or arbitrator at trial or
other proceeding, or on any appeal or review, in addition to all other amounts provided by law.
3. Waivers. Presentment, notice of dishonor, and protest are hereby waived by all Promisor's,
sureties, guarantors, and endorsers hereof.
4. Notices. Any notice to Promisor provided for in this Note shall be given by mailing such notice
by certified mail addressed to Promisor at the property address stated, or to such other address
as Promisor may designate by notice to Promisee. Any notice to Promisee shall be given by
mailing such notice by certified mail, return receipt requested, to Promisee at the address stated
in the first paragraph of this Note, or at such other address as may have been designated by
notice to Promisor.
5. Incorporation by Reference and Conflicts. The above -referenced Rehabilitation Loan
Agreement, as the same may be amended in accordance with its terms, is by this reference,
incorporated herein, and made a part hereof, with like effect as though the same was set forth in
the text of this Note. If any dispute or issue shall arise by reason of any conflict or inconsistency
between the provisions of said Rehabilitation Loan Agreement, as the same may be amended,
and the provisions of this Note, the provisions of this Note shall be construed and enforced in
accordance with said agreement.
Under Oregon Law (Chapter 9.67 OR laws 1989), most agreements, promises, and commitments
made by us after October 3, 1989 concerning loans and other credit extensions which are not for
personal, family, or household purposes or secured solely by the Borrower's residence, must be in
writing, express consideration, and be signed by us to be enforceable.
Optional Advance Note (Secured) Page 2 of 3 Pages
REDMOND HUMANE SOCIETY, Promisor
By
, President
Attest:
, Secretary
Optional Advance Note (Secured) Page 3 of 3 Pages