2D. Authorize Agreements to Continue Bank Participationto: Clarence Krepps, City Manager
from: Ross Plambeck, Redevelopment Manager"
subject: Agreements for Bank Participation in Commercial Rehab Loan Program
date: August 28, 1996
Seven Kalispell banks have responded to the City's request for participation in the loan program
for FY97. Six of the banks participated last year and Montana First has submitted an agreement
now that they have a charter. The banks wanting to participate are:
Bankwest
First Interstate Bank
First Security Bank of Kalispell
Glacier Bank
Montana First Bank
Norwest Bank
Valley Bank
The language, rates and terms of the participation agreements are the same as last year: $40,000
maximum loan at 3% with a 5 year payback. The banks rate is set at 9.5%; therefore, the City
will subsidize 6.5% on the loans. A sample agreement is attached for reference.
FY96 was a productive year for the program with the following statistics:
Number of Loans: 14
Loan Amount: $277,073
Interest Subsidy: $50,693
Total Private Investment: $581,306
Leverage Ratio: 1147%
In addition, there are five loans pending authorization of the new agreements.
Recommendation:
At the September 9, 1996 meeting, please request the City Council's authorization for you to
sign the agreements. Thank you.
FTt'300131k
This agreement Is made this day of , 199___, 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 fmal 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 other loans to go for expansion or remodeling. This in turn will create more jobs
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 575.00 per Ion aRpligation, All fees and costs
are the responsibility of the loan applicant and gfg i1 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).
C. 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 W. Krepps, City Manager
City of Kalispell
Bank Officer
ATTEST: