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05. Reamortization of USDA Loaninc FOR BUSINESS. FOR LIFE. ON�ANA City of Kalispell • www.kalispell.com Office of Community & Economic Development TO: Mayor Tammi Fisher And Kalispell City Council FROM: Jane Howington, City Manager Wade Elder, Revolving Loan Fund Manager SUBJECT: Reamortization of USDA loan # 61-02. MEETING DATE: May 17, 2010 ��1 1st Avenue East Kalispell, M� T 59901 Phone: 495.158. ■ ■ 38 Fax: 405. 58.7758 BACKGROUND: The City of Kalispell's Revolving Loan Fund Program entered into a loan agreement with the United States Department of Agriculture (USDA) —Rural Development in the amount of $750,000.00 on November 27, 2006. The loan is structured for a thirty (30) year term with interest only payments for the first three (3) years and then amortizing for the remaining twenty-seven (27) years, at a 1%interest rate. On February 13, 2009 The City requested the USDA to de -obligate the unused portion of the above mentioned loan. At that time, as is still the case, the principal balance owed on the loan was $257,500.00. By reamortizing this loan the loan payments would be reduced from approximately $31,838.00 / year to $10,945.00. This is a great help to the budget of this fund as the payment schedule in place now is based on the entire $750,000-00 being lent out and generating income, since we have only lent out $257,500.00 it puts the budget back in line. This action is being presented based on the recommendation of the USDA. RECOMMENDATION: Staff is recommending that the Council find that it is in the best interest of the City to reamortize this loan, which would reduce its annual debt service. There is an added benefit of freeing up those funds that would be going to debt repayment could be used in loans to the public for community and economic development in our city. FISCAL IMPACTS: The reamortization of the debt and reducing the annual debt service is anticipated to meet the goals of Revolving Loan Fund program by having more money to lend, which promotes and/or retains employment within the local economy. Respectfully submitted, F\ Wade Elder, RevolvingLoan Fund Managerane Howin ton, City Mana g y g