Atascadero taxpayers will extend their $1.5 million backing on downtown Colony Square’s construction loan for up to another year, the city’s Redevelopment Agency unanimously agreed Tuesday.
In 2009, the agency pledged $1.5 million in redevelopment money as a loan guarantee to help kick-start the long-stalled project.
After the backing came, developers Jim Harrison and Peter Hilf secured a $9 million construction loan that same month.
The retail plaza broke ground in November 2009.
Its first new construction — Galaxy Theatres — opened Friday. Several other tenants are scheduled to open later this year.
The developers were guaranteed the taxpayer backing for 18 months from Oct. 27, 2009. The 18 months will be up April 27.
The deal said that once the shopping center opened, the developers would be responsible for refinancing the project, and the city would no longer be liable for its pledge.
The 18-month deadline was impacted by a theater switch-up in 2009, when theater operator John Roush dropped out of the Colony Square project and Galaxy Theatres took his place. Galaxy also underwent a redesign to bring in more modern equipment such as its motion seating.
Mayor Tom O’Malley said those elements stalled the project by about four months, which translates into this week’s extension request.
In order for the developers to refinance — and release the backing — the project needs to be fully rented, and its tenants must demonstrate a consistent ability to make rent payments, the city said.
Several more months are needed to demonstrate that since Galaxy just opened. Other tenant improvements are still under way, and remaining leases are in the works, according to Mission Community Bank, the lead lender.
In the meantime, the Redevelopment Agency is making money on the deal. Monthly interest payments of 1.77 percent on the backing are going to the agency. The agency also collected a 2 percent loan guarantee fee of $30,000 in November 2009, as consistent with federal guidelines, the city said.
The Redevelopment Agency is on the hook for the $1.5 million if the project should fail and the developers have no collateral to pay back the taxpayers.
However, the risk of that is “slim,” according to city staff, because the project is already built, and most of its spaces are leased.