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Home My WebLink About0201.094IJ $ ~ HONORABLE CITY COUNCIL Palo Alto, California Members of the Council: 10 The purpose of this report is to recommend. that the. Council accept Palo Alto Co~unity Child Care'a (PACCC) request for an extension on repayment of a $75,000 loan from the citYr made in Septeaber 1993. While PACCC has made 'Cons iderable progress in addressing its problem&. with fin!lnc:ial accountabili ty ~ tQuch work remains to be done. Extension of the City loan repayment, through adoption of the proposed amendment to the Promiss.ory Note und.er which t.~e loan was made, will ensure that PACCC's restructuring can be accomplished without end.angering its short-tenD (one year) cash flo" . Bactgrowul In September 1993, the City Council approved a $75,000 short-term loan to PACCC because the organi~ation vas experiencing severe cash flow problems. The city had already taken action to assist PACCC prior to approval of the loan.. includinq approval of a. $50,000 advance in August 1993 to assist· FACCC in meeting' its payroll obliqations, and the assignment of Finance Department resources to PACCC (from Auqust to December 199), to assist PACCC in cleaning I4P its financial operations. On February 14, 1994, PACCC presented a request to the Council to extend the repayment period of the $75,000 loan from June 30, 1994. Instead, PACCC proposed to begin paying $5,000 a month in February, March, April, May and June 1994; to suspend. payment for July through September 1994; and begin repayment at $5,000 per month in oCtober 1994 until full repayment is accomplished in June lS95. CHR:201:94 ,#':'~f'i"': A", ,~ \ -- R'Vi •• of PACCC Tinancial xptorw.tiQ~ On March 15, 1994 Finance Depart.ment staff was able to revi'!'W preliminary financial statements fer July 1993 through. January 1994 with PAOOC representatives. At that time, the cash flow projections which were the basis of the February 10 request from PACCC for a loan extension were also provided. While it is clear that enormous progress has been made in PACCC's financial management and reporting~ considerable work remains to be done to ensure that PACCC's financial statements and budget projections are reliable. While the cash flow proj~ctions support PACCC'S ability to repay the City loan under the requested terms, it is not yet possible to verify th~t actual expenditures will be in line with budget projections. Work remaining includes: o 1&.-nalysis and statements for of information reconciliation of monthly financial fiscal yea~ 19~3-94 to ensure reliability o Reconciliation of bank cash balances to balance sheet information in financial statements o Incorporation of actual revenue and expenditure information from financial statements into cash flow and budget projections ror 1993-94 and followinq years o Independent audit of 1992-93 financial statements; and 1993-94 financial statements afte~ completion of fiscal year o continuation of efforts to analyze profitability of c!lild care operations by center and by care type (infant/toddler, pre-school, scbool age) o Implementation of restructured summer analysis of financi",l viability of summar c01tpletion 'e cO!Ullep4atioti program and program after staff recommends that the Council approve the attached Amendment No.1 to the Promissory Note, under which the City's $75,000 loan was made to PACCC, to extend the term of repayment of the loan, with $15,000 payable in ,",pril 1994 and $5,000 each month for May and .JUne. ~354" and October 1994 through May 1995, with final repayment ($10,000) in June 1995. Staff also recommends tha.t Council request PACCC to report back to Council on its financial condition in October, after completion of the fiscal year, and after PACOC has been able to assess the financial impact of its summer session. CMR:201:94 2 -------..... ---. ! R.s~ctfully submitted, ~4::~~ I \ .~""f:<f."id.~ ci Y Manag:; 'l Attachment: AmendJllent No. 1 to Promi&sory Note co: PACCC CHR:201: 94 3 , .. ,.,.. .';.- " lIIIIIIIDKBiii. 1l0. 1 TO PllQlUSSOIlY ROTE I!B'l'IIBBN Tl!B crTY OF PALO ALTO AIm TmI PALO lUil'O CCIIIroNITY ClIrLll CUB. me. 'nus AMENDMENT nwnber 1 to the promissory n~te dated October 13, 1993 (the ~Note") by and between the CITY OF PALO ALTO. a municipal co~ration of Califo~ia, hereinafter referred to as the II Rolder. • and :PALO .ALTO COMMl1NITY CHILD CARE, lNC., a california nonprofit public benefit corporation, hereinafter referred to as the IIBorrower B , is made and entered into this day of • 1994; II B C rx-~: ~. the Note was previously entered into between the Holder and the Borrower to provide the Borrover with a loan i~ the amount of Seventy Five Thousand Dollars ($75,000) co support the Borrower's child care services in Palo Alto; and WHEREAS. the parties ~ay agre~ to amend the Note from time to time; NOW, THERBFORB, in consideration of their mutual covenante, the parties hereto agree as follows: SECTION 1. The following paragraphs of the Note are hereby amended to read as follows: a. Paragraph 1. -l} 89rrpwer~e Qhl igatiQn. This Note evidences the obligation of the Borrower for the full repayment to the Holder~ on or !Jefore June 30 ~ l.995, of the funds loaned hereunder to the Borrower by the Holder. Such funds are to be used solely by the Borrower in support of the Borrower's community-baeed child care services in the City of Palo ~to.· b . Paragraph 3. "3) Payment. Any amounts ur..der this Note shall, at the option of the Holder~ became immediately due and payable upon the occurrence of any of the following: (a) the failure of the Borrower to provide cOlMlUIlity-based child care services in.. the City of Palo Alto; (bl the failure of the Borrower to remain in good standing as a nonprofit public benefit co~ration while this Note remains unpaid; (c) the voluntary or involunta~ assignment, sale, tra.;:lsfer, or other disposition by the Borrowe,r of its assets or its obligations under this Note ',lDder the bankruptcy. insolvency. receivership, or other c~editors' rights laws; or {d) the failure of the Borrower to observe and comply with any other term, condition or prOVision of this Note. If none of the foregoing occurs, pa~ntEl of the principal sum loaned hereund~r shall be due to the Holder as set forth in the payment schedule attached to this Note as EXhibit A and incorporated herein by this reference.- 1 -- , , • o c. Paragraph 4.. -4.) 1?1a.ce and Manru;r of Raymen!;.. Payments due under this Note are payable at the Office of Revenue Collections of the nolder, at the address of the Holder set forth above. or at such other place or places as the Helder may designate to the Borrower io writing from time to time, in legal tender for the payment of public and private debts and which on the respectivE date on which such payment is due and paid shall be 1mm.ediately availal::lle funds.· .SRCTION~. Exhibit A to the Note is hereby added to read as set forth in the following exhibit attached to this Amendment and incorporated in f~ll by this reference: Exhibit Schedule-. 'A' Entitled • promissory Note Repayment SgCTIQ~. Except as herein modified, all other provisions of the Note shall rernoin in full force and effect. IN WJ:TNESS WHEREOF. the parties hereto have executed this Amendment the day and year first above written. CITY OF PALO ALTO Mayor A'l'TBST: City Cle~k APPROVED AS TO FORM: Se;J.icr Allar:-:-City Attorney APPROVED: Assistant City Manager Director of Finance Risk Manager 2 -- APPROVED AS TO CONTI!NT, Directcr of Comzm.lni ty Services Attachment: EXHIBIT "AI: Promissory Note Repayment. Schedule 3 -- -. STATE OF COUNTY OF o ClIIlTIP ICA'I"B 01' ACDloort.EDGICIDn (Civil Code § 1189) On • before me. · ,:'r' I a notary public in and for said County. personally appeared. __ ~~~~>7.~~~~~~~~~==~~~~~~~~~~~ ~ personally known to me (or proved to me on th~ basis of "s"a"t7i"s"fa=ct""ory evidence) to be the pereon (e) whose r..ame (s) is/al:-e subscribed to the within instnmtent. and acknowledged to me that he/she/they executed the same in his! her/their authorized capacity{ies} ~ and that by his/her/their signature (s) on the instnunent the person(s). or the entity upon behalf of which the person(s) acted~ executed the inatrument~ WITNESS my hand and official seal. 4 ." --.--~-- PRCIIIISSOJl.Y li'0'l'B llBPAYJdIIIIT SCKEIltILB Dat., P.we t April 1994 $15,000 May 1994 5.000 June 1994 5.000 OCtober 1994 5,000 November 1994 5.000 December 1994 5,000 January 1995 s}aoo Pebruary 1995 5,000 March 1995 5 1 000 April 1995 5,000 May 1995 5~OOO June 1.995 10,000 TOTAL: $75,000 5