Resolution 3981 - Approve Leveraging Agreement with First Federal104
RESOLUTION NO. 3981
A RESOLUTION APPROVING A LEVERAGING AGREEMENT NEGOTIATED BY THE
PLANNING, ECONOMIC AND COMMUNITY DEVELOPMENT DEPARTMENT WITH
FIRST FEDERAL SAVINGS BANK AND AUTHORIZING THE CITY MANAGER TO
SIGN SAID LEVERAGING AGREEMENT.
WHEREAS, the City of Kalispell through the Planning,
Economic and Community Development Department is the recipient of
certain income through the Tax Increment Funds, UDAG Program
Income, Community Development Block Grant, and other federal and
state programs; and
WHEREAS, the City under Montana law and City ordinances is
authorized to utilize income received and budgeted to leverage
funds made available through financial institutions for
commercial and residential development and re -development, and
WHEREAS, the Planning, Economic and Community Development
Department has in the past negotiated a Leveraging Agreement
with First Federal Savings Bank providing for the administration
of budgeted funds to be used for residential rehabilitation loans
and grants, attached hereto as Exhibit "A" and thereby made a
part hereof.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
KALISPELL AS FOLLOWS:
SECTION I. That the Leveraging Agreement negotiated by
the Kalispell Planning, Economic and Community
Development Department with First Federal Savings Bank
(Exhibit "A") is hereby approved.
SECTION II. That the City Manager is hereby authorized
to execute said Leveraging Agreement on behalf of the
City of Kalispell, provided that the funds so obligated
for leveraging have been budgeted and set aside for
that purpose.
SECTION III. This Resolution shall take effect
immediately upon passage by the City Council and
approval by the Mayor.
PASSED BY THE CITY COUNCIL OF THE CITY OF KALISPELL AND APPROVED
BY THE MAYOR THIS 6th DAY OF May g91.
Douglag D. Rauthe, Mayor
ATT T:
Amy H. Robertson
Finance Director
1
EXHIBIT "A" 10 5
L E V E R A G I N G A G R E E M E N T
This agreement made this 15th day of April 1991 by and between
First Federal Savings Bank, 202 Main Street', Kalispell, Montana
59901, herein known as the "LENDER" and the City of Kalispell, a
Municipal Corporation, herein known as the "CITY".
The parties desire to achieve maximum benefit from the use of
Community Development Block Grant funds available to the CITY
through leveraging of these funds with funds made available by the
LENDER. The purpose of this leveraging is to provide for
rehabilitation of housing units located within the boundaries
outlined on the attached map, marked Exhibit "A".
Parties agree:
I. The CITY shall:
A. Deposit with "LENDER" the sum of One Hundred Thousand
Dollars ($100,000.00) into interest bearing savings accounts for
the purpose of:
1. Providing prepaid interest subsidies to the LENDER
for approved loans. These subsidies along with the
3% interest rate charged to the borrower will equal
an interest rate which will be set at 3% below the
interest rate being charged by LENDER on similar
type loans. The subsidy charged will be the
difference between the loan rate and the 3%
interest rate paid by borrowers on owner -occupied
properties, or 6% interest rate by borrowers of
non -owner occupied properties.
2. Interest -earned by the CITY on the loan guarantee
account will be left in that account. Any interest
that is earned on the interest subsidy account,
loan processing account, and the grant account will
also be transferred to the loan guarantee account.
1
Loan Guarantee Account
(a) The sum of approximately Twenty -Three Thousand
Five Hundred Dollars ($23,500.00) already
deposited in a Certificate. Account No.01-
01017647 plus any interest earned from the
Grant and Interest -Subsidy Account, the Loan
Processing Cost Guarantee Account, and the
Grant Account will be used to "buy back" loans
made under this agreement whenever such loans
have twice become delinquent for 90 days.
Grant and Interest SubsidyiDelinguency Account:
(b) The sum of One
($100,000.00) shall
separate statement
5h% interest per
interest therein sh
subsidy and to
Hundred Thousand Dollars
be deposited by CITY in a
account bearing the rate of
annum. This sum and the
all be used to pay interest
cure the initial 90 day
delinquencies. In the event of prepayment of
the loan, LENDER shall rebate to this account
the amount of the unearned interest. Upon the
making of a loan, the subsidy (that is, the
percentage rate of interest which is 6% below
the current market rates as defined in A-1)
shall be deposited immediately into a separate
interest bearing account. Interest earned in
this account will be credit to, and become an
integral part of the loan guarantee account.
106
To effect such purposes, the CITY will pay from such account the
sums necessary to being current any loan that has been 90 days
delinquent. If the loan again becomes 90 days delinquent, the
CITY, upon request, shall immediately purchase such loan from
LENDER. All payments to be made from the above mentioned funds of
the CITY on deposit with the LENDER.
A. Be solely responsible for preliminary applications,
inspections and cost estimates.
B. Perform all work write-ups on the project and solicit
invitations for bid on behalf of the borrower.
C. Make final determination of the loan (through committee
review) and notify the applicant of determination upon
loan recommended by LENDER pursuant to Community
Development guidelines.
D. Retain responsibility for compliance with the lead -based
paid regulations, the Department of Housing and Urban
Development's noise Assessments and other requirements.
II. The LENDER shall.:
A. Make available for loans to eligible applicants
approximately Two Hundred Thousand Dollars ($200,000.00)
or such amount allowable in relation to the balance in
the "Interest -Subsidy Account". In the event that the
funds in the Interest -Subsidy Account should be depleted
prior to the expiration of this agreement, CITY shall, at
its own discretion transfer funds from the Grant Account
into the Interest -Subsidy Account. LENDER then will make
available for loans to eligible applicants, additional
amounts allowable in relation to the balance in the
"Interest -Subsidy Account".
The maximum loan amount will be Twenty Thousand Dollars
($20,000.00) and shall be amortized according to the
following schedule. Any exceptions to the schedule will
be dealt with on an individual basis.
AMORTIZATION SCHEDULE
LOAN.AMOUNT TERM
$1,000 2 years
$2,000 3 years
$30000 4 years
$4,000 5 years
$5,000 6 years
$6,000 7 years
$7,000 8 years
over $8,000 10 years
The interest rate on loans made to Owner Occupied loans
will remain the same during the life of the loan. Non -
Owner Occupied loans which are written for a term longer
than 5 years shall be subject to an annual adjustment of
interest rate during years 6-10. . The interest rate
charged will never be less than that rate charged during
years 1-5. If adjusted, the rate charged during years 6-
10 will be set at 3% over the yield on a one year U.S.
Treasury security. If the rate is increased during years
6-10, the borrower will be responsible for any increase
in interest rate, and their payments will be modified and
increased accordingly. The CITY'S subsidy during years
6--10 would remain unchanged.
B. Complete application to each property owner who is
referred by the CITY, including credit reports; after`
preliminary application, inspection and preliminary cost
estimates by the CITY.
1
107
C.
D.
E.
Make recommendations based on Community Development
guidelines on each loan.
Disburse funds to property owner and the contractor as
agreed to in the contract and inspect percentage of
completion for work having been performed.
Cause waiver of liens to be obtained for labor and
materialmen for work performed and authorized by LENDER
and owner.
III. The CITY and the LENDER will jointly:
A. Review and select bids for construction.
B. Review all loans.
C. Inspect work in progress.
D. Do final inspection before loan settlement.
IV. LENDER shall make said funds available to the CITY immediately
pursuant to the terms of this agreement.
This AGREEMENT shall remain in force for a period of twelve
(12) months from the date hereof, or until all funds are
obligated, whichever date is the sooner. .
V. All interest earned from the guarantee loan account will
remain in the account. The guarantee loan account will remain
active until such time as the LENDER releases the guarantee,
but in any event said guarantee loan account shall be closed
on July 1, 2002.
VI. CITY and LENDER agree that HUD, or any of their duly
authorized representatives have right to examine and audit all
work data, documents, proceedings and activities related to
all loans made under this agreement.
FIRST FEDERAL SAVINGS BANK OF MONTANA
r-B, 4ZCL=
Pursuant to resolution by
the City of Kalispell
Bruce Williams, City Manager
City of Kalispell, Montana
ATTEST:
Amy H Robertson
TITLE: Finance Director