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2. Bank Negotiations UpdateCity of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406) 758-7000 Fax - (406) 758-7758 REPORT TO: Honorable Mayor and City Council FROM: James H. Patrick, City Manager SUBJECT: Update on Negotiations for the potential purchase of Wells Fargo Bank located on 1" Ave East. MEETING DATE: July 11, 2005 BACKGROUND: One of the goals Council has had for the last several years is to find a location to consolidate City services into a City owned facility for better customer service as well as eliminating lease payments. Staff has pursued several alternatives that marginally address some of the current needs of Community Development, Building, Zoning, and Planning but do not address other general government needs for expansion or future needs. Wells Fargo is in the process of relocating their downtown facility to section 36 and they have indicated a willingness to sell their current facility (minus the drive up facility) to the City. Council's authorization to the City Manager to begin negotiations with the Bank has resulted in the following proposal: Bank Building appraisal: $1.4 million Negotiated price: $1.1 million Remodeling, moving, capital: $800,000 Staff would recommend financing $1.5 million with a Board of Investment 10 year loan at a rate of approximately 3.8% finance rate which would result in an annual payment of approximately $181,704.39, We would recommend taking $57,000 from General Fund, $57,000 from Building Fund, $57,000 from Public Works Department, and $10,705 from Community Development. The other $400,000 we would recommend using from cash on hand in the Building Department for their portion of the remodeling. We still need to do a phase two environmental inspection. We do not anticipate landing anything more or less than what has been previously found in other phase two evaluations downtown. We have reviewed all of the maintenance records of the building. The roof was replaced in 1997 and the warranty expires in 2007. New HVAC was installed in 2001 and upgraded in 2004. The purchase does seem to be feasible, the property priced well, and meets City needs into the future. RECOMMENDATION: Council direct staff to prepare a purchase contract with Wells Fargo for consideration at the July 181h meeting. FISCAL EFFECTS: This will result in expending approximately $1.8 million in acquisition, remodeling, and moving. Council members had expressed a hesitance of purchasing any commercial property since it would then be taken off of the tax roles. Wells Fargo paid $6,148.45 in City taxes in 2004 which equates to approximately $0.37 per square foot. At the same time, the City paid $63,504 in lease payments for Building and Community Development, TriCity Planning, and Parks or the equivalent of $8.86 per square foot. The purchase of the bank building does eliminate the lease payments the City currently makes and consolidates City services both of which are Council goals. ALTERNATIVES; As suggested by the City Council. Respectfully submitted, James H. Patrick, City Manager