I1. Haig Debt Restructure memoCity of Kalispell
Charles A. Harball Office of City Attorney
City Attorney 201 First Avenue East
P.O. Box 1997
Kalispell, MT 59903-1997
TO:
FROM:
SUBJECT:
MEETING DATE:
MEMORANDUM
Doug Russell, City Manager
Charles Harball, City Attorney
Tel 406.758.7709
Fax 406.758.7758
charball@kalispell.com
Haig House Investments LLC — Restructuring of Debt on Lot 6 Old
School Station
June 7, 2021 — Regular Council Meeting
BACKGROUND: Haig House Investments, LLC, [Haig] through its principal Haig Ermoian,
entered into a Contract for Deed with the City to purchase Lot 6 of Old School Station on April 1,
2019. The amount of $75,000 was paid down with the balance of $91,212 held on a contract calling for
interest only monthly payments at 5.0% for 36 months at which time the balance will be due.
Haig has now secured a construction loan from Three Rivers Bank to construct the improvements upon
the property. Due to the current rules regulating the bank, it will not be able to buy out the City's
portion of the debt as they would otherwise like to do. Further the bank cannot extend the loan unless
it is in first position and that cannot happen unless the City relinquishes its fee simple interest in the
property and subordinates to the construction loan.
Upon discussing this matter with Haig and the bank, a resolution to this conundrum is recommended as
follows:
Haig pays to the City the sum of $20,000 now and provides the City with a new Promissory Note and
Deed of Trust for the balance, $71,212, with monthly payments of principal and interest at the rate of
5% per annum over the period of 5 years. By restructuring the transaction in this way, the City will
receive the immediate consideration of the $20,000 paid now along with a Note that pays principal and
interest at a favorable rate secured by a Deed of Trust on the property. The City has already received
approximately $9,500 in interest from Haig and will receive an additional $9,500 in interest over the
next 5 years of the term of the new note. Further the taxable value of the property will be substantially
increased with the construction of the new improvements to the benefit of the tax base of the City
which addresses one of the goals of the tax increment district.
RECOMMENDATION: It is recommended that the Council approve the restructure of the Haig debt
as described above.
ALTERNATIVES: The Council may discuss other alternatives with city staff regarding the financing
of this project.