During the 1980s and 1990s, the City of Billings operated a revolving loan fund for downtown building and business improvements.  By 2000, the $1.6 million fund was nearly depleted and the City could not originate new loans.  In October 2000, the City of Billings and five banks with downtown offices executed an Inter-Creditor Agreement.  That agreement extended up to $1.6 million in bank loan funds to improve downtown businesses and properties.  The amount was later expanded to $3.2 million.  The original agreement had a five year term and at the end of that time, the banks and City extended the agreement for five more years.  Staff and the Revolving Loan Committee request that the City Council extend the term of the Inter-Creditor Agreement for five more years to October 2, 2015, and to add Stockman Bank as a new bank participant.     

The City Council may

• Approve the amended and extended Inter-Creditor Agreement and allow the Revolving Loan Fund to continue operating for five additional years and with participation by Stockman Bank, or
• Disapprove the Inter-Creditor Agreement amendment and term extension.  The City would make no more loans for downtown property improvements.  The City would be obligated to continue collecting loan payments from downtown owners and to repay each bank that has an outstanding commitment to the loan fund. 

The Inter-Creditor Agreement obligates the City to repay loans that are committed by the banks.  The primary source of security for the bank loans is the City's portion of the Fund and secondarily, the security provided by the end borrowers.  Security is usually in the form of second mortgages and personal guarantees.  There are 26 outstanding loans with $3.32 million in loans receivable.  Only one borrower is delinquent, totaling about $280,000. 

Staff and the Revolving Loan Committee recommend that the City Council approve the amendment to the Inter-Creditor Agreement that adds Stockman Bank as a participant and extends the term for five years.