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EXHIBIT 2 <br />Judson Brown, City of Santa Ana September 7, 2018 <br />Depot at Santiago: Permanent Loan Analysis Page 4 <br />RECOMMENDATION <br />It is important to note that under certain circumstances, KMA would recommend that <br />the increase in permanent loan proceeds be utilized to pay down the principal balance <br />of the City's loan rather than to pay increases in project costs or to pay down the <br />deferred Developer Fee. However, this Project includes a variety of funding sources <br />which were competitively awarded based on the assumption that the City would <br />provide $3.0 million in financial assistance (9% Tax Credits and Affordable Housing and <br />Sustainable Communities (AHSC) funds). <br />As such, reducing the City's financial assistance amount could create issues with the <br />lenders of these funding sources. Thus, KMA recommends that for this Project, the <br />increase in permanent loan proceeds be utilized to cover additional Project costs or pay <br />down the deferred Developer Fee given that it is estimated to result in higher residual <br />receipts payments to the City. <br />25C-10 <br />1809002:SA:TRB <br />19090.017.006 <br />