GSA Billings, L.C. and First Interstate Bank have development agreements with the City for reimbursements for public improvements in the East Billings Urban Renewal Area (EBURD).  The agreements are funded by annual tax increment finance (TIF) receipts.  The City needs to sell tax increment revenue bonds for a storm sewer, street, sidewalk, curb and gutter project in the district.  In order to provide security for bond purchasers and provide adequate debt payment coverage, both parties have executed agreements that subordinate their payments to the debt payments.

City Council may:

• Approve, or;
• Disapprove the subordination agreements.  If the reimbursement payments remain superior to potential debt payments, it may be difficult or impossible for the City to sell TIF bonds to finance the desired public improvements. 

There is no direct financial impact from approving the agreements.  The City will continue making the development agreement payments to both parties, after satisfying the bonded debt requirements. 

Staff recommends the City Council approve the subordination agreements from GSA Billings, L.C. and First Interstate Bank.