Title
(Redevelopment Agency Successor Agency/City Council) Agreements Related to Forgiveness of Loans to The Good Neighbors Club of Del Paso Heights, California
End
FileID
File ID: 2025-00349
End
Location
Location: 3700 Knightlinger St., District 2
End
Recommendation
Recommendation: 1) Adopt a Redevelopment Agency Successor Agency (RASA) Motion authorizing the Interim City Manager or designee to execute the attached Assignment and Assumption Agreement on behalf of RASA, which will assign RASA loans totaling $426,000, which were made to The Good Neighbors Club of Del Paso Heights, California in 1989 and 1991, to the City of Sacramento; and 2) adopt a City Council Motion: a) allocating $10,000 from Del Paso Heights Redevelopment Bond funds (Fund 3809) for the City’s payment of $10,000 to RASA for City assumption of the loans pursuant to the attached Assignment and Assumption Agreement; b) authorizing the Interim City Manager or designee to execute the attached Assignment and Assumption Agreement on behalf of the City; and c) authorizing the Interim City Manager or designee to execute the attached Agreement for Loan Forgiveness and Deed Restriction with The Good Neighbors Club of Del Paso Heights, California, forgiving the loans totaling $426,000.
End
Contact
Contact: Leslie Fritzsche, Economic Investment Manager, (916) 808-5450, lfritzsche@cityofsacramento.org, Office of Innovation and Economic Development
End
Presenter
Presenter: None
End
Attachments
Attachments:
1-Description/Analysis
2-Assignment and Assumption Agreement
3-Agreement for Loan Forgiveness and Deed Restriction
End
Description/Analysis
IssueDetail
Issue Detail: The Sacramento City Redevelopment Agency Successor Agency (“RASA”) is responsible for winding down the obligations of the dissolved Redevelopment Agency of the City of Sacramento (“Agency”) under the review of the Sacramento Countywide Oversight Board, the State Department of Finance (“DOF”), the State Controller’s Office, and the Sacramento County Auditor-Controller. The City Council for the City of Sacramento (“City”) serves as the governing body for RASA and City employees staff RASA’s activities. Other cities in the County with redevelopment agencies also have successor agencies with these same obligations. One of the obligations of successor agencies is the management of outstanding Agency loans, including collection of applicable loan payments.
This report requests the City Council approve the assignment from RASA to the City of two former Agency loans made to The Good Neighbors Club of Del Paso Heights, California (Good Neighbors) in exchange for the City’s payment of $10,000 to RASA (see Assignment and Assumption Agreement attached as Attachment 2). The two loans total $426,000 (one loan was made in 1989 for $266,000 and the second was made in 1991 for $160,000). In addition, the report requests City Council approve execution of an Agreement for Loan Forgiveness and Deed Restriction (included as Attachment 3) which would provide for City forgiveness of the loans if Good Neighbors continued to operate a childcare center at its current location at 3700 Knightlinger Street for the next ten years.
Background
The Good Neighbors Child Development Center (“Center”) was officially opened on November 28, 1965, at Allen Chapel Church in Del Paso Heights. It provided preschool education for 52 children. The Center employed a staff of 12, all residents of Del Paso Heights. In April 1968, Good Neighbors purchased three lots on the corner of Morey Avenue and Knightlinger Street for a future expanded childcare center. In 1973, they received a license from the State of California to operate a “child development center” for 32 children.
In 1989, the Agency provided a construction loan in the amount of $266,000 to Good Neighbors to construct a childcare facility at 3700 Knightlinger Street. In 1991, the Agency provided a second construction loan to Good Neighbors in the amount of $160,000. In 1992, Good Neighbors’ Minnette Smith Child Development Center (“Center”) was dedicated. The Center has provided uninterrupted community childcare services in this facility since it opened, including through the COVID pandemic, when it provided childcare services for children of front-line responders. In 2023, the childcare services were expanded to accept toddlers, in addition to preschoolers.
Good Neighbors currently has eight full-time employees and four are residents of Del Paso Heights. The Center serves up to 50 children.
The two Agency loans carry no interest and only become due if certain specified actions occur, including without limitation the property is sold, transferred, or loan debt is refinanced. In 2023, Good Neighbors submitted a letter to RASA requesting forgiveness of the loans because Good Neighbors now desires to expand the Center and cannot secure financing until the loan encumbrances are removed from title to the property.
On November 13, 2023, the Sacramento County Oversight Board, by Resolution No. 2023-008, approved forgiveness of these two loans. However, on December 22, 2023, DOF denied the request, indicating the Oversight Board had not made a proper determination that forgiveness of the loans is in the best interests of the taxing entities.
At the January 8, 2024 meeting, the Oversight Board instructed RASA staff to secure letters from the taxing entities indicating that loan forgiveness was in their best interests. These letters were collected and RASA staff returned to the Oversight Board on May 13, 2024, at which time the Oversight Board approved Resolution No. 2024-0009, authorizing forgiveness of the loans again.
On July 2, 2024, DOF responded by denying the loan forgiveness request again, indicating the Oversight Board had not addressed how this action would reduce liabilities and increase revenue for the taxing entities. DOF staff indicated though that the loans could be forgiven if they were transferred to the City. With that information, the Oversight Board approved the assignment of these two loans to the City of Sacramento at its meeting on January 13, 2025. On March 4, 2025, DOF approved assignment of the two loans totaling $426,000 from RASA to the City.
End
PolicyConsiderations
Policy Considerations: The recommendations in this report are consistent with the City’s goals to support existing child care centers and work to support increasing the supply of childcare in the City.
End
EconomicImpacts
Economic Impacts: None.
End
EnvironmentalConsiderations
Environmental Considerations: The recommendation actions in this report are government fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment, and thus do not constitute a “project” under the California Environmental Quality Act (CEQA Guidelines § 15378(b)(4);
Sustainability
Sustainability: None.
End
Commission/Committee Action
Commission/Committee Action: None.
End
RationaleforRecommendation
Rationale for Recommendation: City staff is asking the City Council to approve the assignment of the two Agency loans from RASA to the City of Sacramento and authorize City payment of $10,000 to RASA for the assignment. California Health and Safety Code section 34181(e) allows amendment or termination of Agency agreements when such action would be in the best interests of the taxing entities. If assignment of the loans to the City is approved, the City would pay $10,000 as consideration for assumption of these loans, allowing the taxing entities to collectively receive some compensation.
The taxing entities are currently not receiving any payment on the loans and are not expected to in the near future since Good Neighbors plans on continuing to operate a child care center at the 3700 Knightlinger Street site and the loans are due only if certain conditions occur, such as the property is sold, transferred, or refinanced. Accordingly, assignment of the loans to the City in exchange for $10,000 is in the best interests of the taxing entities. Assignment of the loans will also further RASA’s duty to wind down the affairs of the Agency expeditiously, as required by Health and Safety Code section 34181(a)(1).
Staff is also recommending forgiveness of these loans because Good Neighbors has been operating as a childcare center at its current location for approximately 35 years and plans on continuing to serve future generations of Del Paso Heights children. Forgiveness of the loans is conditioned on Good Neighbors operating as a childcare center for at least 40 children from 12 months to 5 years with affordable tuition rates for 10 more years, as outlined in the Agreement for Loan Forgiveness and Deed Restriction document (Attachment 3).
Assignment of the loans from RASA to the City will increase the availability of much-needed childcare in the City, which furthers the City’s goal of increasing opportunities for childcare slots and enhancing after-school activities for youth. Expansion of the Good Neighbors childcare center would benefit the general Sacramento community by provided further affordable childcare in the Del Paso Heights community. Such expanded childcare also helps the local economy because parents can remain in the workforce when they secure reliable and affordable childcare. In addition, forgiving the loans reinforces the City’s commitment to small businesses that serve disadvantaged areas of the community.
End
FinancialConsiderations
Financial Considerations: The proposed Assignment and Assumption Agreement requires City payment of $10,000 to RASA. Such $10,000 would come from Del Paso Heights redevelopment funds (Fund 3809).
End
LocalBusinessEnterprise
Local Business Enterprise (LBE): Good Neighbors is a local business enterprise.
End