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I4. Res. 6184, MWED Loan Progran Transfer Development Services Department CITY of 201 1St Avenue East ALISPELL Kalispell, 59901 Phone: (406))7 758-794-794 0 Fax: (406)758-7739 www.kalispell.com/plannine REPORT TO: Doug Russell, City Manager FROM: Jarod Nygren, Development Services Director SUBJECT: IRP Loan Transfer and Assumption to MWED MEETING DATE: February 5, 2024 BACKGROUND: Development Services currently manages United States Department of Agriculture Office of Rural Development Intermediary Relending Program ("IRP") funds. On September 5, 2023, Council authorized the City Manager to execute an Administrative Agreement with Montana West Economic Development (MWED) for transfer of the IRP funds. Under that agreement MWED will provide services to the City of Kalispell related to the management and administration of the IRP loan programs. Under the previous Administrative Agreement all rights and obligations of the loan funds would have still been with the City of Kalispell. After further discussions with USDA staff and MWED it is preferable that the entirety of the loan be transferred to MWED including all rights and obligations of the original IRP award(s). Transfer & assumption of the loans would meet the same objective to the City while also relieving the City of any of the associated indebtedness. MWED as part of the loan transfer& assumption would continue to manage the loan in accordance with the City work plan. RECOMMENDATION: It is recommended that Council approve Resolution 6184, as Resolution authorizing the City Manager to transfer all rights and obligations of the United States Department of Agriculture Office of Rural Development Intermediary Relending Program ("IRP") funds to Montana West Economic Development for their assumption. FISCAL EFFECTS: Approval of the recommendation would transfer all indebtedness of City IRP funds to MWED. ATTACHMENTS: Resolution 6184 Previous IRP Administrative Agreement c: Aimee Brunckhorst, Kalispell City Clerk RESOLUTION NO. 6184 A RESOLUTION AUTHORIZING THE CITY MANAGER TO TRANSFER ALL RIGHTS AND OBLIGATIONS OF THE UNITED STATES DEPARTMENT OF AGRICULTURE OFFICE OF RURAL DEVELOPMENT INTERMEDIARY RELENDING PROGRAM ("IRP") FUNDS TO MONTANA WEST ECONOMIC DEVELOPMENT ("MWED") FOR THEIR ASSUMPTION. WHEREAS, on May 5, 2003, the City Council passed Resolution 4780, which established an Economic Development Revolving Loan Fund for small business retention and expansion in the City of Kalispell and created an Economic Development Loan Review Committee; and WHEREAS, the US Department of Agriculture Rural Development sources make loan funds available for the creation of local government revolving loan programs for small business retention and expansion which may stimulate economic development activity by assisting the private sector where a funding gap exists and alternative sources of public and private financing are not adequate; and WHEREAS, on September 5, 2023, the City Council approved Resolution 6158, which authorized the City and MWED to enter into a mutually beneficial arrangement enabling MWED to expand its loan program offerings in the City in order to benefit small business and eliminate duplication of services; and WHEREAS, the City Council and MWED now desire to transfer all of the City's rights and obligations of the IRP loan funds to MWED. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL AS FOLLOWS: SECTION 1. That the City Manager is hereby authorized and directed to transfer all rights and obligations of the United States Department of Agriculture Office of Rural Development Intermediary Relending Program funds to Montana West Economic Development. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL, THIS 5TH DAY OF FEBRUARY, 2024. Mark Johnson ATTEST: Mayor Aimee Brunckhorst, CMC City Clerk Intermediary Relending Program Administrative Agreement Between the City of Kalispell and Montana West Economic Development THIS AGREEMENT is entered into on this day of , 2023, by and between the City of Kalispell (the"City") and Montana West Economic Development("MWED"), a Montana not for profit organization. in regard to the administration of the United States Department of Agriculture Office of Rural Development(the"USDA-RD") Intermediary Relending Program ("IRP") (hereinafter referred to collectively as the "Agreement")between the City and MWED. WITNESSETH WHEREAS,the City has two loans from the United States Department of Agriculture Office of Rural Development(the "USDA-RD")under the Intermediary Relending Program ("IRP"). MWED will establish a revolving fund totaling $460,000.00 (the "Revolving Fund") comprised of the two City USDA-RD loans; and WHEREAS,MWED shall use the IRP to provide financing to leverage private investment in the City by making low interest loans; and WHEREAS,MWED has substantial experience regarding Federal loan programs, including loan programs and funding through the USDA, such as the IRP. Furthermore, the IRP will complement the existing loan programs which MWED has administered for two decades. MWED currently operates and oversees IRP loan programs and is experienced in working with and complying with the administrative requirements of State, Federal, and community lending programs in Montana; and WHEREAS,the City and MWED desire to enter into a mutually beneficial arrangement that enables MWED to expand its loan program offerings in the City to benefit small business. MWED will provide services to the City related to the management and administration of the IRP. NOW,THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties to this Agreement hereby agree as follows: 1. To the extent that the IRP as described in the Recitals is established, MWED will provide all necessary management and administrative services regarding the IRP, existing City established loans, and subsequent Ultimate Borrower loans approved under the program. In that regard, MWED acknowledges that it has reviewed the terms of the USDA-RD Loan Agreements and supporting documentation attached hereto as Exhibit"A", and, as part of its administrative functions,will ensure compliance with the requirements as set forth in the agreements as well as all other USDA-RD requirements. Without limiting the generality of the foregoing administrative obligations, MWED will undertake all the following obligations: a. MWED will produce all necessary financial statements, loan summaries,reports and similar materials in a timely manner to the USDA-RD, and will provide copies of the same to the City and other persons or entities which may require such documentation under the IRP; b. MWED will produce and provide in a timely manner all necessary budgets to the USDA-RD, or other agencies of the federal or state governments regarding the IRP including, but not limited to budgets for loan programs and proposed administrative costs; c. MWED will manage the Ultimate Borrower loan portfolios created through the use of the IRP loan funds by, among other things, creating and retaining all necessary documentation regarding such loans; disbursing loan proceeds; receipting and depositing payments of principal and interest; funding the required reserves, communicating with Ultimate Borrowers; and any other administrative measures necessary to properly manage each of the Ultimate Borrower loans; d. MWED will manage existing City loan portfolio created through the use of the IRP loan funds by, among other things, creating and retaining all necessary documentation regarding such loans; receipting and depositing payments of fees, principal and interest; funding the required reserves; communicating with borrowers; and any other administrative measures necessary to properly manage each loan; e. MWED shall make debt service payments due on City USDA-RD IRP loans; f. MWED shall manage all security interests in Ultimate Borrower collateral and in the event of an Ultimate Borrower loan default shall collect and sell all physical collateral which will go back into the loan fund; g. MWED shall deposit and hold all City IRP loan funds in specifically designated interest bearing accounts at a federally insured bank or other financial institution. Each account shall not exceed the maximum FDIC insurance coverage limits; h. MWED will include the City IRP funds into MWED's overall marketing plan for IRP loan programs; i. MWED will assist the City in completing all required audits and providing the results to the USDA-RD regarding the IRP; and j. MWED will determine and notify the City of all reserves required consistent with the USDA-RD regulations. 2. Initial and revolved Ultimate Borrower loan decisions shall be made by a majority vote of the MWED loan committee comprised of members selected by MWED. 3. Administrative Fees. MWED may receive reasonable loan origination fees plus interest on each Ultimate Borrower loan it makes, subject to compliance with the IRP administrative and program requirements. 4. Revolved funds are the cash portion of the Revolving Fund that is the principal and interest payments from Ultimate Borrower loans. Revolved Funds are not considered Federal funds. Revolved Funds shall be used for(1) debt service payments on the USDA-RD IRP loan; (2) additional Ultimate Borrower loans; (3) debt service reserve fund; (4) reserve for bad debts; (5)reasonable administrative costs; and(6) technical assistance provided to Ultimate Borrowers. 5. Arbitration. To the extent that disputes arise regarding provisions of this Agreement, the parties will attempt to resolve such disputes through good faith negotiations. If the parties cannot resolve disputes during that time period, or such other period as may be mutually agreeable, the parties shall resolve such disputes exclusively through binding arbitration. Such arbitration shall take place in Kalispell, Montana before a single arbitrator under the commercial arbitration rules of the American Arbitration Association (the"AAA"). If the parties cannot agree on an arbitrator, one shall be selected by the AAA. The prevailing party is entitled to recover attorney's fees and costs. 6. Indemnification. MWED shall indemnify and hold harmless the City for any shortfall in Revolving Fund cash whether in principal, interest, or otherwise as a result of Ultimate Borrower loan defaults. To the extent that cash in the Revolving Fund is insufficient for the MWED to make a debt service payment to USDA-RD, MWED shall make a deposit to the Revolving Fund cash account sufficient to meet the required dept service payment. MWED shall indemnify and hold harmless the City, the City Development Services Department, and their agents and employees from and against all claims, damages, losses and expenses, including attorney fees, arising out of, or resulting from, the MWED's performance of its obligations under this Agreement, provided that any such claim, damage, loss, or expense is: A. Attributable to bodily injury, sickness, disease or death or to damage or destruction of tangible property, including the loss and use resulting therefrom; and, B. Is caused in whole or in part by any willful misconduct, intentional or negligent act or omission of MWED or its contractor(s), and subcontractor(s), or anyone directly or indirectly employed by any one of them, for whose acts any of them may be liable, regardless of whether or not it is caused in part or by a party indemnified hereunder. 7. Termination. Upon providing 90 calendar days written notice to the other Party or as otherwise agreed between the Parties, either Parry may terminate this Agreement with respect to one or more services under this agreement. In the event that the IRP to USDA- RD remains outstanding and upon termination of the Agreement by either parry as outlined, all fees and expense reimbursements earned through the effective date of termination shall be due and payable in accordance with the provisions hereof. MWED agrees that upon termination of this Agreement, MWED will cooperate in good faith with the City to provide the City (or its designee)with reasonable assistance to make an orderly transition,including the following: i. Developing a transition plan with assistance from the City or its designee; ii. Providing training to City personnel or its designee's personnel to perform the IRP services; iii. Organizing and delivering to the City copies of all records and materials of all Ultimate Borrower loan files; iv. MWED shall continue to service and manage any Ultimate Borrower loans outstanding until they are paid in full; v. Indemnification shall remain in full force and effect from the date of termination of this Agreement for Ultimate Borrower loans outstanding at the time of termination of this Agreement. 8. This Agreement constitutes the entire Agreement between the City and MWED regarding the IRP and supersedes any prior discussions or negotiations between the Parties. This Agreement may be amended or modified only in a writing signed by both Parties that expressly states that it is intended to modify the terms of this Agreement. 9. This Agreement is being executed in the City of Kalispell by Montana legal entities and shall be governed by Montana law. City of Kalispell By: Date: Doug Russell, City Manager ATTEST: Aimee Brunckhorst, City Clerk- STATE lerkSTATE OF MONTANA ) County of Flathead ) On this day of , 2023, before me, a Notary Public for the State of Montana,personally appeared Doug Russell, City Manager of the City of Kalispell, and Aimee Brunckhorst, City Clerk of the City of Kalispell, and acknowledged to me that they executed the written instrument on behalf of said entity. Montana West Economic Development By: Date: Christy Cummings Dawson, President ATTEST: Aimee Brunckhorst, City Clerk STATE OF MONTANA ) County of Flathead ) On this day of , 2023, before me, a Notary Public for the State of Montana,personally appeared Doug Russell, City Manager of the City of Kalispell, and Aimee Brunckhorst, City Clerk of the City of Kalispell, and acknowledged to me that they executed the written instrument on behalf of said entity.