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Item 1.G.
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| City Council Regular | |
| Date: | 06/24/2024 |
| Title: | Resolution Authorizing the Lease Purchase Financing and Historical Tax Credit Investment for the new City Hall |
| Presented by: | Teri Walker |
| Department: | Finance |
| Presentation: | No |
| Legal Review: | No |
| Project Number: | N/A |
RECOMMENDATION
Staff recommends City Council approves the resolution authorizing staff to enter into an agreement for the equity investment for the City's receipt of Historic Tax Credits and the associated lease financing of the New City Hall project with First Interstate Bank.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
On 11/28/22 City Council authorized staff to begin examining Historic Tax Credits for the New City Hall project with Wishneff and Associates. In 2023, the City solicited proposals from potential investors for both the Historic Tax Credits and Lease Financing. The City received a proposal from First Interstate Bank that provides both the needed lease financing as well as the investment in the potential Historic Tax Credits.
While final terms are still being negotiated, this resolution will authorize staff to enter into an agreement so long is it is compliant with the parameters, and is financially beneficial to the City. Additionally, the City is agreeing to incur legal and financing fees associated with the deal, even if an agreement is never reached.
Estimated net proceeds from the Historic Tax Credits are $5 million. These funds will be used to reduce the overall lease financed amount.
While final terms are still being negotiated, this resolution will authorize staff to enter into an agreement so long is it is compliant with the parameters, and is financially beneficial to the City. Additionally, the City is agreeing to incur legal and financing fees associated with the deal, even if an agreement is never reached.
Estimated net proceeds from the Historic Tax Credits are $5 million. These funds will be used to reduce the overall lease financed amount.
ALTERNATIVES
City Council may:
- Approve; or,
- Not Approve the resolution.
FISCAL EFFECTS
The proposal from First Interstate Bank will provide both the needed financing for the City Hall project as well as the purchase of the Historic Tax Credits. The proposed financing will be a variable rate that will reset every 5 years, but can be paid down early by the City. The Historic Tax Credits are estimated to generate a net benefit to the City of approximately $5.0 million.
Currently the City is financing the project with the Montana Board of Investments Intercap Loan program. The rate for this is variable, and currently at 5.75%. The City is looking to enter into an agreement that is financially beneficial to the City through a combination of financing the project and selling the Historic Tax Credits. First Interstate Bank has provided a proposal that would purchase the credits, but require the lease financing to be done through their program.
Currently the City is financing the project with the Montana Board of Investments Intercap Loan program. The rate for this is variable, and currently at 5.75%. The City is looking to enter into an agreement that is financially beneficial to the City through a combination of financing the project and selling the Historic Tax Credits. First Interstate Bank has provided a proposal that would purchase the credits, but require the lease financing to be done through their program.