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Public Hearing - Amendment of Downtown Management District Plan, Management Agreement with Downtown Inc., and Loan Agreement May 18, 2009 Page 2 DISCUSSION On December 15, 2008, the City Council adopted a resolution establishing the Downtown Santa Ana Community Management District (CMD) and the levy of an assessment of the property owners within the District to fund various activities in the Downtown. The CMD plan provided that the initial tax assessment was to be levied in FY 2008-09, and the operating term of the CMD was January 1, 2009 to December 31, 2013. Downtown Inc. is the newly created non-profit organization that will oversee the expenditure of the assessments collected during the five year term of the CMD. The Board of Downtown Inc. recently took an action to defer the assessment levy until FY 2009-10, with the first installment being due in October 2009. The Board felt that the new assessment may place an undue hardship on the property owners in the CMD due to current challenging economic conditions. This change in assessment levy necessitates an amendment to the CMD plan approved by the City Council (Exhibit 1). Further, the operating term of the CMD must also be modified to now reflect January 1, 2010 to December 31, 2014. Since the deferral of the first year's assessment to the property owners in the CMD would not yield funds until January 2010, each director on the Board has agreed to make a loan to the corporation in order to begin implementation of the CMD activities in calendar year 2009. The loans are based on the amount of the first year's assessment and will be repaid by the fifth year. These loans will generate approximately $186,000, which will be used for administrative, operating, corporate start-up, and marketing/promotional activities as outlined on Exhibit 2. The funds will enable Downtown Inc. to hire a new, full-time Executive Director along with a support staff person as well as assuming certain basic services currently provided by the City. The City is the recipient of the annual property tax assessments; therefore, it is necessary to enter into a management agreement with Downtown Inc. to oversee the implementation of the five-year program as authorized when the CMD was established. The decision to levy the assessment will be determined by the City Council on an annual basis and will be based on a program budget developed by Downtown Inc. 80A-2