10. Ordinance 1425 - Community Development Revolving Loan and Redevelopment Program - 2nd Reading4DCity of Kalispell
Post Offlce Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758
REPORT TO: The Honorable Mayor Pamela B. Kennedy and City Council
FROM: Susan Moyer, Community Development Director
Chris A. Kukulski, City Manager
SUBJECT: Community Development Revolving Loan and Redevelopment Program
MEETING DATE: June 17, 2002
BACKGROUND: Resolution No. 3922, adopted by City Council on February 5, 1990, established the
Tax Increment Assistance Policy for the Downtown Urban Renewal District. Since
that time, two other TIF Districts have been created by City Ordinances. The need
exists to establish how Program Income generated through an earlier investment of
Tax Increment in any one of the district, as well as generated from returns on Federal
or State Grants, will be utilized on an equitable and effective basis.
Mae Nan Ellingson of Dorsey & Whitney LLP, bond counselor for the City of
Kalispell, has been working with staff to develop and refine the attached Ordinance
which establishes program requirements, creates a program income account, and
specifies revenues to be deposited in such an account.
It is the intent through the use of Program Income, as approved by City Council, for
the City to be able to continue the implementation of the goals and objectives of the
three TIF Plans as well as utilize revenues from state and federal grants for eligible
activities within the city limits and/or the specific district(s). Additionally, the
Ordinance:
➢ Identifies the funding sources for the Community Development
Revolving Loan Program and Redevelopment Fund account.
➢ Identifies the eligible uses of the Fund.
➢ Prioritizes the Uses of the Fund.
➢ Establishes the three types of assistance to be provided through the
Fund.
➢ Establishes the criteria the Council must consider when approving
such funding assistance.
➢ Outlines the application process and requirements to be followed when
staff and council are reviewing assistance requests.
RECOMMENDATION: Staff is recommending the City Council approve Ordinance No. 1425.
FISCAL IMPACT: An ongoing source of economic development revenue to provide incentives or
encourage development/redevelopment within the city limits and the respective
Urban Renewal Districts.
ALTERNATIVES:
Respectfully submitted,
l
Susan Moyer, Director
Community Developmen
As suggested by Council.
Memo generated: June 27, 2002
6
Chris Kukulski,
City Manager
ORDINANCE NO. 1425
ORDINANCE RELATING TO THE CITY OF KALISPELL,
MONTANA COMMUNITY DEVELOPMENT REVOLVING
LOAN AND REDEVELOPMENT PROGRAM; ESTABLISHING
PROGRAM REQUIREMENTS; CREATING COMMUNITY
DEVELOPMENT REVOLVING LOAN PROGRAM AND
REDEVELOPMENT ACCOUNT AND SPECIFYING
REVENUES TO BE DEPOSITED THEREIN
BE IT ORDAINED by the City Council (the "Council") of the City of Kalispell,
Montana (the "City"), as follows:
Section 1. Recitals.
1.01. Authorization and Previous Council Action. Montana Code Annotated, Title 7,
Chapter 15, Parts 42 and 43, as amended (the "Act") authorized Montana municipalities to
create, establish and maintain urban renewal districts to provide the redevelopment and
rehabilitation of blighted areas within the municipality. Pursuant to the Act, the City has created
three separate urban renewal districts and elected to use tax increment financing as contemplated
by the Act as follows:
a. Ordinance No. 933, passed and approved on September 10, 1979, adopted the
Kalispell, Montana Downtown Redevelopment Plan as an urban renewal plan for the project area
known as the Downtown Redevelopment District (the "Downtown District");
b. Ordinance No. 1259, passed and approved on March 17, 1997, adopted the West
Side Urban Renewal Plan as an urban renewal plan for the project area known as the West Side
Redevelopment District (the "West Side District"); and
C. Ordinance No. 1260, passed and approved on March 17, 1997, and adopted the
Airport/Athletic Complex Redevelopment Plan as an urban renewal plan for the project area
known as the Airport/Athletic Complex Redevelopment District (the "Airport District").
The Downtown District, West Side District and Airport District are collectively referred
to as the Districts.
1.02. The use of tax increment to further the goals of the Act and Plans adopted by the
City is limited under the terms of the Act. The ability to use tax increment provision terminates
upon the fifteenth year, unless the District was created prior to January 1, 1980, in which case the
provision terminates upon the seventeenth, following the adoption of the Plan(s), or upon the
payment or provision for payment in full or discharge of all bonds for which the tax increment
has been pledged and the interest thereon, whichever last occurs.
1.03. The City's ability to capture and expend new tax increment in the Downtown
District terminates on July 1, 2002.
Section 2. Statement of Intent and Purpose. The City finds that all of the goals and the
objectives of the Downtown District Plan have not been satisfied, that several of the elements of
blight that dictated the creation of the Downtown District and Plan still exist. In establishing its
Community Development Revolving Loan and Redevelopment Program, it is the City's desire to
continue the implementation of the goals and objectives of the Downtown Plan, the West Side
Plan, and the Airport Plan upon termination of tax increment financing, to protect and preserve
the initial investment of tax increment in the Districts, and to provide a mechanism for funding
needed projects in accordance with the Act.
Section 3. Creation of Community Development Revolving Loan Program and
Redevelopment Fund; Deposits:
3.01. Name of Fund. The City currently maintains on its books and records a
Community Development Revolving Loan Program Fund. As of July 1, 2002, the name of the
fund shall be the "Community Development Revolving Loan Program and Redevelopment
Fund".
3.02. Deposit of Funds. The City Treasurer shall deposit into the Community
Development Revolving Loan Program and Redevelopment Fund as received the following
sources of revenue, which shall be deemed Program Income:
(a) Principal and interest on all loans made under the Revolving Loan Program;
(b) Principal and interest on all payments due the City under terms of the
Development Agreement dated as of March 8, 2000, between the City and ACG-Kalispell
Investors LLC regarding the Kalispell Center Mall and Equity Supply;
(c) Principal and interest on all loans made from tax increment funds derived from
any of the Districts;
(d) Revenues received from state and federal grants for projects within the City of
Kalispell and the repayments of any loans made thereby;
(e) Receipts from the sale of property or lease payments derived from property
financed by tax increment funds derived from any of the Districts;
(f) Such other funds as may be, from time to time, appropriated by the City Council.
Investment earnings on all monies in the Fund shall be credited to and remain in the
Fund.
Section 4. Eligible Uses of Fund. Funds in the Development Fund may be used for:
1) Land acquisition;
2) Demolition and removal of structures;
3) Relocation of occupants;
4) Public improvements;
5) Costs incurred in the exercise of urban renewal powers, including urban renewal
projects as authorized by Kalispell City Council in Ordinances No. 933, 1259 and
1260;
6) Acquisition of infrastructure -deficient areas or portions thereof,
7) Assemblage of land for development or redevelopment by private enterprise or
public agencies, including sale, initial leasing, or retention by the municipality
itself at its fair value; and
8) Administrative cost, as approved by the City Council
Section 5. Forms of Assistance. Monies in the Fund will be expended for projects as
approved by the City Council pursuant to the City's annual budget, an Urban Renewal Plan or as
specifically approved by the City Council. The expenditure of the Fund will be made in the form
of acquisition or construction of public infrastructure as provided in Section 6 hereof; direct
loans as provided in Section 7 hereof; a subsequent rate of interest on bank loans for renovations
to existing facilities as provided in Section 10; or to pay administrative costs as set forth in
Section 4.
Section 6. Direct Infrastructure Assistance. The Council of the City has the authority to
assist developers in the implementation of redevelopment projects. The direct funding of public
infrastructure improvements needed to attract or accommodate a privately financed development
project in a District or the acquisition and clearing of land therefore will have the highest priority
for use of the Fund. The Fund will not be used to finance projects in Districts while tax
increment funds are still available. The City may demolish and clear buildings, structures, and
other improvements from any real property owned or acquired in the Districts and make them
available for development as building sites. Requests for assistance in the form of infrastructure
and land acquisition shall be submitted in accordance with Section 8.
If the City uses monies from the Revolving Fund to acquire land and make the site
available for development by a private entity, it will offer such property for development through
the RFP processes set forth in the Act or as otherwise may be provided by ordinance.
Section 7. Direct Loans. The Council may, at its discretion, if funding is available
provide low -interest loan funds to qualifying developers for on -site work covering:
1)
Acquisition;
2)
Land assemblage;
3)
Landscaping;
4)
Site Lighting;
5) On -site utility work and utility taps;
6) Parking, paving and striping; and
7) Direct assistance in the rehabilitation, retention or development of affordable
housing for the low and very -low income residents.
Development activities such as building, plan review, design or management fees are not
eligible activities to be funded with proceeds of a revolving loan. The City Council shall each
year, when establishing the City's budget, establish the interest rates for the Program for the
ensuing fiscal year. Costs to be paid from loan proceeds may not be incurred by the applicant
prior to the effective date of funding approval and the satisfaction of any conditions of such
approval. The amount of direct loan for a single project may not exceed 10% of the total project
cost.
The interest rate for a revolving fund loan shall be calculated so as to provide a below
market rate of interest and to provide a reasonable level of return to the Program.
Section 8. Application Process and Requirements. Loan applications will be available
from the Community Development office. Upon submittal by the developer of a completed
application and all necessary supporting documents, the Community Development office will
review the application for completeness and conformance with the Program requirements. If the
application is in order, the Community Development office will forward it to the City Manager
and City Council for consideration. The following information must be contained in the
application:
(1) Project Description — A description of the project, type of development and scope
of work including:
(a) Plans/schematics
(b) Project schedule - proposed timetable for completion of project
(c) Project feasibility — substantiate the market and economic feasibility of the
project
(2) Project Financing — A description of the financial arrangements of the project to
include:
(a) Sources of funds - detailing terms and conditions
(b) Lender commitments - evidence of commitments of funds necessary for
completing the project
(c) Cost breakdown - estimated cost of the project
(d) Pro forma - projections of anticipated income, expenses, cash flow and
depreciation for the first five years of the project
(e) Leverage Ratio - Ratio of public to private investment
(3) Development Entity — A public disclosure of the development entity and other
involved parties including information on qualifications and past experience
(a) Financial Disclosure - Full financial disclosure of development entity with
evidence that the developer has both the financial and legal ability to complete
the proposed project. As per adopted policy, this information will be kept
confidential, subject to a challenge of this policy in a court of law. The
developer will provide a letter from a certified public accountant that the
financial statements submitted in support of the application have been
reviewed or some other document from a source acceptable to the City
verifying the truth and accuracy of the financial statement.
(4) Employment Generated — Provide the best estimate of construction and permanent
jobs to be generated by the project and a wage/salary scale for employment
created.
(5) Letters of Intent from tenants for lease project
(6) Economic benefit from the Project to the City's urban renewal districts. Describe
increase to the property tax base. If no increase to tax base, describe the benefits
of the project to urban renewal districts and other taxing jurisdictions.
Section 9. Criteria in Evaluating Requests for Assistance. In evaluations of an
applicant's request for an infrastructure or direct loan, the City Council will take into
consideration the following aspects of the project for which assistance is sought:
(1) Economic Stimulus;
(2) Employment Generation;
(3) Tax Generation;
(4) Effective utilization of existing infrastructure;
(5) Financial Assistance - Other forms of financing associated with the project
including equity, lender participation, industrial development revenue bonds, and
state or federal monies will be examined to assess the need for TIF assistance;
(6) Project Feasibility;
(7) Impact Analysis/Assessment - This is based on environmental impacts, design
and dislocation associated with the project;
(8) Special or Unique Opportunities - The extent to which the project represents a
special or unique opportunity to meet local priority needs that are consistent with
economic revitalization and urban redevelopment objectives;
(9) Timely Completion; and
(10) Leverage Ratio — Ratio of public to private investment.
Section 10. Interest Subsidized Loans.
10.01. Purpose. The low interest loan subsidy program is provided to assist businesses
and property owners in making physical improvements to their commercial/retail property that
will benefit and improve the Districts, sustain and improve the tax base and stimulate the
ongoing revitalization of the Districts. The City will subsidize the interest rate on a loan or a
portion of a loan to be made by a local bank participating in the Program.
10.02. Eligible Proiects. Projects that may be funded under the Program include:
(1) Elimination of code deficiencies
(2) Energy conservation/weatherization improvements
(3) Removal of physical barriers to the handicapped
(4) Replacement of fixtures to existing structures
(5) Renovation through alteration, additions to or enhancement of existing structures
(6) Capital improvements to the real estate (permanent fixtures)
(7) Exterior storefront improvements
(8) Replacement of exterior signs
(9) On site improvements (paving and landscaping)
Properties within the Districts are eligible to make a preliminary application to the City to
determine the eligibility of items to be funded by the Program. Items not eligible include
acquisition of property, personal inventory, equipment and cash flow. Costs to be financed
through the interest subsidy program may not be incurred by the applicant prior to the effective
date of approval and the satisfaction of any conditions of such approval.
10.03. Sizing, Interest Rate and Term of Loan. The minimum amount of a subsidized
commercial loan is $5,000 and the maximum amount is $50,000; and is subject to the
requirement of a 50150 dollar match between the subsidized loan amount and the amount of the
non -subsidized loan or matched by an equity investment in the proposed project. Loans will be
made over a five-year amortization period; or, if the applicant is a tenant, for the term of the
lease not to exceed five years. The City Council shall each year, when establishing the City's
budget, establish the interest rate for the loan subsidy program for the ensuing fiscal year.
10.04. Application Process and Review by Architectural Review Committee.
Applications are available at the Community Development office. Upon receipt of the
application by the Community Development Department and all necessary supporting
documentation, the application will be forwarded to the Architectural Review Committee, which
will schedule a meeting which the applicant is expected to attend.
The Architectural Review Committee will review the proposed project for conformance
to the Redevelopment Plan in the respective District and may make a recommendation if needed
to improve the aesthetical appearance of the project as well as address ADA requirements.
Upon approval of a project, the City will issue a commitment letter to the applicant and
the participating bank specifying the amount of the subsidized loan and the rate thereon. The
participating bank shall provide to the City in writing a schedule showing the annual dollar
amount of interest subsidy required to amortize the loan at the rate of subsidy set by the Council.
The participating bank shall make and service the loan. If an approved loan is not closed within
90 days of notification of approval, the City's commitment to make the loan shall terminate.
The Architectural Review Committee reserves the right to review a request for extension
of time on the actual implementation of the loan. This request will only be approved if there is a
valid reason why the project has not begun. The extension period will be evaluated on a case -by -
case basis.
Section 11. Effect. This Ordinance shall take effect from and after 30 days of its passage
by the City Council on second reading and approval by the Mayor.
Attest:
Attest:
PASSED, ADOPTED and APPROVED on first reading this 17th day of June, 2002.
Mayor
City Clerk
PASSED, ADOPTED and APPROVED on second reading this 1st day of July, 2002.
City Clerk
Mayor