PASADENA — In the wake of a rejection by Lloyd's Bank for an $8.5-million letter of credit, those involved in trying to develop the joint YWCA-YMCA facility have turned to the Board of Directors for help.
"We are hopeful that the city will use its imagination in finding a way to finance the Y and not raise costs," said George Baffa, attorney for the YMCA, at Monday's Board of Directors meeting.
The $15-million project, which calls for renovating the existing YWCA building to house the joint YWCA-YMCA facility, has encountered a number of hurdles since its conception four years ago. The project has elicited protests from local preservationists, dissension in the ranks of the two Ys, and has had to navigate City Hall's maze of planning and building commissions.
But the project may have hit its largest obstacle in November, when Lloyds Bank rejected the organizations' request for a letter of credit to back the bonds to be issued to finance the project.
"If we don't get a bond fairly soon, we will lose our grants and it will probably be impossible to continue with the project," Baffa said.
Monday, after the directors all but rejected three staff financing proposals, Director John Crowley called for a private meeting between board members and Y representatives to discuss "imaginative possibilities."
Crowley said the meeting yielded two or three possible ways to finance the $8 million needed to begin construction. The solutions will be discussed at Monday's Board of Directors meeting.
"The approach in general at the meeting was, how we can subdivide responsibility," Crowley said.
"The city may participate in the arrangement in some fashion," he added, but ruled out a letter of credit.
If the $8 million cannot be raised, "we could sell the (YMCA) building and look for another project, either with or without the YWCA, or we could not sell the building and do the best we can," said Terry Cooper, a YMCA board member.
The YWCA would remain at its present location and possibly add on to the existing structure, said Donna Lewis, director of the Pasadena YWCA.
In the staff report, which was neither officially accepted nor rejected by the Board of Directors, City Manager Don McIntyre outlined three financing plans for the YMCA-YWCA.
The first option, which McIntyre recommended that the board approve, calls for the city to issue certificates of participation through the Pasadena Community Development Commission. These would be backed by a letter of credit secured by the YWCA-YMCA with another bank. A certificate of participation is a type of municipal security that uses city property or other nonprofit property as collateral.
This is the same approach the Ys were planning to use when Lloyd's Bank rejected their request for a letter of credit in November. The bank said the Ys had insufficient assets to back the requested letter of credit.
The report says this option poses no risk to the city be
ause the facility itself would be used as security, and if the organizations defaulted, the bank that issued the letter of credit would be responsible for paying off the certificates.
Such a transaction is similar to recent financings the city set up for Pacific Clinics and is currently involved in with the Art Center College of Design.
Under the second option, the city would issue certificates of participation through the Pasadena Community Development Commission without a letter of credit. The project and any of the two organization's assets would be pledged as security for the certificates.
The report states that the two organizations would have to pay considerably higher interest rates without a letter of credit.
The report also said that this plan would mean the city might have to foreclose on the facility if the Ys could not make their payments.
"The city may not wish to be in the position of foreclosing on sensitive community programs," the report reads.
With the third option, the city would issue certificates of participation for the YWCA-YMCA backed by the general fund. Under this arrangement, the city would own the facility and recover the money through a lease agreement with the Ys.
The report says this plan places an undesirable credit burden on the general fund. The city attorney's office also has reservations about this approach because it involves the use of public money to aid organizations that promote a certain religion.