Loading...
08. Authorize Agreements to Continue Bank Participation in Commercial Rehab Loan Programthe City of Incorporated 1892 Planning, Economic & Community Development Department P.C. Pox 1997 Kalispell, MT 59903-1997 M M0 To: Al Theien, Interim City Manager From: Lawrence Gallagher, PECDD Director Subject: Commercial Rehabilitation Loan Program Date: August 14, 1996 248 Third Avenue East (406) 758-7740 (4 ) 758-7739 (office fax) (406) 758-7758 (City Hall fax) Please review the attached Memo from Ross regarding the Request for Proposal for Bank Participation in the Commercial Rehabilitation Loan Program and give me your comments and suggestions. GJV 84 �;lU.l:�►k7 OPPORTUNITY interoffice M E M O R A N D U M to: Larry Gallagher, PECDD Director from: Ross P lambeck, Redevelopment Manager subject: RFP's for Bank Participation in Commercial Rehab Loan Program date: August 12, 1995 Attached are the RFP's and Agreement for participation in the Commercial Rehab Loan Program by Kalispell banks. The current agreements are expiring and we need to solicit the banks if they would like to participate for FY97. Last year, we solicited proposals from banks, anticipating we would award the contract to the bank with the lowest interest rate. As the process evolved, it became apparent the program and the loan applicants would benefit from having as many banks participate as possible. The applicant could then choose the bank that best met their needs. The interest rate was established by taking the lowest quote from the banks submitting proposals, and the other banks agreed to use that rate. This year is a little different, since we know up front that more than one bank will be participating in the program. I think it would be more straightforward for us to establish a reasonable current market interest rate and include it in the RPP. I taped with a loan officer at a non -participating bank, and asked what would be an appropriate rate to include in the proposed agreement. He said prime plus 1.25 per cent would be a low but fair rate for the banks. The Wall Street Journal shoves the prime at 8.25 per cent; therefore, the rate to include in the agreement would be 9. 5 %, the same as last year. Recommendation: Please ask the City Manager to inform the City Council we will be requesting Kalispell banks to participate in the loan program. The request should include the interest rate set at 9.5%. The agreements can be ready for the September 9 Council .meeting to authorize the City Manager to sign them. AGREEMENT This agreement is made this day of , 1991 by and between , Kalispell, Montana 59901, herein known as the "LENDER", and the City of Kalispell, a municipal corporation, herein known as the "CITY". The parties to this agreement desire to achieve maximum benefit from the use of Tax Increment Funds available to the CITY through leveraging of these funds with funds made available by the LENDER. Parties Agree: I. The CITY SHALL: Commit the sum of One Hundred Thousand Dollars ($100,000) to the total rehabilitation loan program to be used as interest leveraging to stimulate the economy, encourage job opportunities in the Commercial and Central Business District in the Kalispell Downtown Redevelopment Plan. A. Provide prepaid interest leveraging to the LENDER for approved loans, which subsidy shall be paid to provide the LENDER a return of 9.5 percent upon such loans. (Applicant's loan rate is 3 percent; therefore, the interest subsidy is 6.5 percent.) B. The CITY, through an Architectural Review Committee appointed by the Kalispell Development Corporation and approved by the Mayor and the City Council, will review and approve all applications meeting the goals and guidelines of Kalispell's Downtown Redevelopment Plan ([ordinance No. 933). C. The City of Kalispell's Planning, Economic and Community Development Department will be solely responsible for the preliminary applications for commercial loans. The Planning, Economic and Community Development staff will present all loan applications to the Architectural Review Committee with all documentation. D. The City shall make final determination of the loan's eligibility (through the Architectural Review Committee) and notify the applicant of determination pursuant to Planning, Economic and Community Development Department guidelines. II. The LENDER SHALL: Following the intent of the Community Reinvestment Act, the LENDER will make funds available for the principal for improvement loans in the Kalispell Downtown Redevelopment Plan commercial district to eligible applicants. A. The maximum loan amount will be $40,000 for a five (5) year period. The present rate of interest will be 9.5 percent. B. The LENDER will handle all credit investigations in regard to these loans and make all credit decisions as to credit worthiness. C. The LENDER will ensure all concerned that there will be no losses incurred on behalf of the City of Kalispell, Montana. D. The LENDER. in participating in this loan program agrees that there is a definite market for these type of loans and that it will greatly enhance the business community, particularly in the aesthetic and safety areas. The LENDER can foresee that these moneys to various businesses will be merely a start, as many of them will match or exceed the low interest loans with ether loans to go for expansion or remodeling. This in turn will create more gobs for the low and moderate income person for a healthier business community. E. The LENDER will service all loans to the final processing, notification, closing, collection, and all other normal banking procedures. F. The record file on these loans will be open to inspection for municipal auditing purposes. G. The LENDER will be entitled to collect those fees incidental and necessary to process the loan including title insurance, appraisals, recording and reconveyance fees, and loan closing fees. The loan closing fee shall not exceed $75.00 per loan aDDlication. All fees and costs are the responsibility of the loan applicant and are not an eligible item that can be included in the loan. III. The CITY and the LENDER agree to the following: A. That the use of the committed funds will be used to subsidize the interest rate to the agreed upon rate. Upon loan closing by the LENDER, the LENDER will notify the CITY of the interest subsidy. The LENDER will submit a statement showing the loan amount amortized at both the 3 percent rate and the 9.5 percent rate to determine the interest subsidy dollar amount for the difference of 6.5 percent. The CITY will process a voucher for payment to the LENDER for the specified interest subsidy and forward it to the LENDER. B. This Agreement shall remain in force for the period of the City's 1997 fiscal year (July 1, 1996, to June 30,1997). B. Loans will be made on a first come, first served basis. Once the CITY has expended the total interest subsidy amount contained in their fiscal year budget, pending loans will have to remain pending until the CITY makes a determination whether to provide additional funds for the interest subsidy. Clarence Krepps, City Manager City, of Kalispell Bank Officer ATTEST: August 12, 1996 (name of bank) RE: Request for Proposals: Participation in the Commercial Rehabilitation Loan Program overview of Program: The City of Kalispell would like to invite your bank to submit a proposal for participation in the Commercial Rehabilitation Loan Program. The loans are to stimulate capital improvements to downtown properties, improve the exterior appearance of properties, and retain and create employment opportunities in the downtown. The City will enter into an agreement with the bank where the City will subsidize the loan rate down to 3% using tax increment funds. The bank will specify an amount of money committed to the program for use as principal for the loans. The bank will also service the loan accounts, determine the credit worthiness of the applicants and assure the City there will be no losses incurred on the City's behalf. when the bank closes on the loan application, the City will forward to the bank the difference between the quoted rate and the 3% loan rate made to the applicants. History of Program: Beginning in June of 1980, the City has subsidized the interest rates to 3% to help stimulate private reinvestment by downtown business people, professionals and property owners in financing capital improvements to their businesses and properties. The program has proven to be a highly effective partnership in stabilizing and improving the downtown through the use of tax increment funds. A current Status Report is attached showing the history of the loan program and the leveraging achieved through the public/private partnership. The City's goal is to continue the program in a similar format that will achieve the same positive results. Specifle Items to include in the Proposal: Attached is a sample agreement identifying the program's procedures, guidelines, and commitments made between the City and the Bank. The specific items that need to be identified in the proposal are indicated with an underlined blank. Submission of Proposal and Council Action: Please submit your proposal by 5 pm, August 28, 1996, to Debbie Gifford, Clerk of Councils at her office in City Hall, or mail to P.O. Box 1997, Kalispell, MT 59903. It is anticipated the City Council will authorize the City Manager to enter into an agreement at the September 9, 1996 City Council Meeting. Should you have questions, please call Ross Plambeck at 758-7742. Thank you for your attention.