On February 19, 1994, the City Council approved a twenty-six year Ground Lease with Jon Marchi.  At that time, Mr. Marchi was Chairman of the Board of Directors for Big Sky Airlines.  Under this Ground Lease, Mr. Marchi built and subleased a new hangar facility to Big Sky Airlines.  Mr. Marchi later built an office building and also subleased that facility to Big Sky Airlines.  On October 10, 2000, the City Council approved an Amendment to the Ground Lease to extend the lease term by five additional years to February 28, 2025, allowing Mr. Marchi additional time over which to amortize his investment.  Mr. Marchi financed the construction of these facilities via a loan from Whitefish Credit Union and subsequently assigned a security interest in the Ground Lease to Whitefish Credit Union.  Big Sky Airlines ceased operations on March 8, 2008.  After Big Sky Airlines left the Airport, the hangar and office building were vacant for a number of years, and consequently Mr. Marchi recently filed for Chapter 11 bankruptcy protection.  Mr. Marchi now subleases the hangar to Cape Air, the current Essential Air Service airline at the Airport, for hangar and maintenance purposes.  He was awarded a lease with the Federal Aviation Administration for subleasing the office building and has invested in tenant required improvements in that building.  Through the bankruptcy court approved reorganization plan, Mr. Marchi assigned the Ground Lease to Marchi Family Enterprises, LLC and obtained additional financing from Freedom Bank.  Under the reorganization plan, Mr. Marchi also requested that his outstanding debt with Whitefish Credit Union be transferred to Freedom Bank.  The bankruptcy court approved a stipulation consenting to the request and also approved the overall reorganization plan. The Ground Lease requires any assignment of the lease for security purposes have the approval of the City.  The Consent to Assignment of Note and Security Agreement and Lease Assignments stipulates the conditions of the City's consent to assignment of Whitefish Credit Union's security interest to Freedom Bank.
 
A copy of the Consent to Assignment of Note and Security Agreement and Lease Assignments is on file in the City Clerk's office.
 

City Council may:

• Approve the Consent to Assignment of Note and Security Agreement and Lease Assignments transferring the Whitefish Credit Union security interest to Freedom Bank; or
• Disapprove the Consent to Assignment of Note and Security Agreement and Lease Assignments transferring the Whitefish Credit Union security interest to Freedom Bank.

There is no financial impact with the Consent to Assignment of Note and Security Agreement and Lease Assignments; it merely gives the required approval of the transfer of a previously approved security interest in the Ground Lease from one financial institution to another in accordance with the bankruptcy court approved reorganization plan.
 

Staff recommends City Council authorize the Mayor to execute the Consent to Assignment of Note and Security Agreement and Lease Assignments approving the assignment of Whitefish Credit Union's entire security interest in the Marchi Family Enterprises, LLC Ground Lease and associated subleases to Freedom Bank.