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Item 3.
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| Date: | 03/28/2022 |
| Title: | Public Hearing and First Reading Ordinance Amending the Revolving Loan Program |
| Presented by: | Andy Zoeller, Finance Director |
| Department: | Finance |
| Presentation: | Yes |
| Legal Review | Not Applicable |
RECOMMENDATION
Staff recommends City Council hold a public hearing and approve this ordinance on first reading, amending the revolving loan program.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
The Billings Montana City Code Article 13-1100 established a revolving loan program for the City of Billings. In 1983, the City implemented a tax increment revolving loan program with increment from the Downtown Redevelopment District. At that time the City used approximately $600,000 of tax increment moneys to make loans for eligible projects under the program. Principal of and interest received on the program loans were deposited in to the revolving loan fund as received.
In 1999, the ordinance was adopted, establishing the program in the Billings Montana City Code. In an effort to bolster the funds available for revolving loans, a consortium of local banks entered into an agreement with the city, whereby the banks made available to the city an additional $1,600,000 for the program. The city was able to access the bank funds if there were no available moneys in the revolving fund from which to make a loan.
On October 2nd, 2000, the City and the bank pool entered into an inter-creditor agreement with a 5-year term. The original agreement was extended for an additional 5 year term on August 5, 2005, and again on September 14, 2010. Over this time the revolving loan program grew to an amount that no longer required the additional bank pool funds. The agreement expired on October 2, 2015 due to lack of need. The City made a final payment to the bank pool on February 21, 2012.
Since 1988, no additional tax increment money has been deposited in the fund and the city does not plan to or anticipate appropriating any additional revenues to the fund. As of June 30, 2021, there was approximately $918,000 of cash in the fund available for loans. The fund had approximately $1,804,748 in principal amount of loans outstanding. The total assets of the program were approximately $2,719,814 on June 30, 2021.
After the expiration of the bank pool agreement, the downtown revolving loan committee continued with its original members and operating in the same manner that was established with the original ordinance. In 2021, the committee chair announced his planned retirement from banking and informed the committee that he would be stepping down. This change prompted a review of the current ordinance.
Upon review of the existing ordinance, it was determined that amendments to the ordinance are needed. City staff met with stakeholders to identify appropriate changes to the ordinance. A summary of the recommended changes are as follows:
Recommendation: Provide for the committee to establish specific loan policies and procedures, consistent with adopted criteria.
Purpose: Beyond what is available on the loan application, official policies of the committee have not been established, or are unable to be located.
Recommendation: Modify the four-person committee to remove a reference to the "bank pool" and replace it with a commercial lender from a local bank. Remove a representative from the "Yellowstone Regional Development Company" and replace it with a member or employee of the Big Sky Economic Development Authority. Finally, remove a member from the "Downtown Billings Property Owners Committee" and replace it with a member of the Downtown Billings Alliance.
Purpose: The original organizations are no longer in place or lack formal organization.
Recommendation: Expand the term from 2 years to 4 years, with no limitation on the maximum number of terms.
Purpose: As committee members change, it is very valuable to maintain historical knowledge. Meetings are held when needed, and are generally infrequent. A four-year term would provide for more consistency.
Recommendation: Remove in their entirety the bank pool section 13-1104, Notice of Public Hearing section 13-1109, and Recitals section 13-1101.
Purpose: These sections are no longer relevant to the revolving loan program or ordinance.
In 1999, the ordinance was adopted, establishing the program in the Billings Montana City Code. In an effort to bolster the funds available for revolving loans, a consortium of local banks entered into an agreement with the city, whereby the banks made available to the city an additional $1,600,000 for the program. The city was able to access the bank funds if there were no available moneys in the revolving fund from which to make a loan.
On October 2nd, 2000, the City and the bank pool entered into an inter-creditor agreement with a 5-year term. The original agreement was extended for an additional 5 year term on August 5, 2005, and again on September 14, 2010. Over this time the revolving loan program grew to an amount that no longer required the additional bank pool funds. The agreement expired on October 2, 2015 due to lack of need. The City made a final payment to the bank pool on February 21, 2012.
Since 1988, no additional tax increment money has been deposited in the fund and the city does not plan to or anticipate appropriating any additional revenues to the fund. As of June 30, 2021, there was approximately $918,000 of cash in the fund available for loans. The fund had approximately $1,804,748 in principal amount of loans outstanding. The total assets of the program were approximately $2,719,814 on June 30, 2021.
After the expiration of the bank pool agreement, the downtown revolving loan committee continued with its original members and operating in the same manner that was established with the original ordinance. In 2021, the committee chair announced his planned retirement from banking and informed the committee that he would be stepping down. This change prompted a review of the current ordinance.
Upon review of the existing ordinance, it was determined that amendments to the ordinance are needed. City staff met with stakeholders to identify appropriate changes to the ordinance. A summary of the recommended changes are as follows:
Recommendation: Provide for the committee to establish specific loan policies and procedures, consistent with adopted criteria.
Purpose: Beyond what is available on the loan application, official policies of the committee have not been established, or are unable to be located.
Recommendation: Modify the four-person committee to remove a reference to the "bank pool" and replace it with a commercial lender from a local bank. Remove a representative from the "Yellowstone Regional Development Company" and replace it with a member or employee of the Big Sky Economic Development Authority. Finally, remove a member from the "Downtown Billings Property Owners Committee" and replace it with a member of the Downtown Billings Alliance.
Purpose: The original organizations are no longer in place or lack formal organization.
Recommendation: Expand the term from 2 years to 4 years, with no limitation on the maximum number of terms.
Purpose: As committee members change, it is very valuable to maintain historical knowledge. Meetings are held when needed, and are generally infrequent. A four-year term would provide for more consistency.
Recommendation: Remove in their entirety the bank pool section 13-1104, Notice of Public Hearing section 13-1109, and Recitals section 13-1101.
Purpose: These sections are no longer relevant to the revolving loan program or ordinance.
ALTERNATIVES
City Council may:
- Approve the amendments to BMCC 13-1100 as recommended by staff; or,
- Modify the proposed amendments; or
- Not approve the recommended amendments to BMCC 13-1100.
FISCAL EFFECTS
There is no fiscal impact to adopting the recommended amendments to BMCC 13-1100.
As of June 30, 2021, the revolving loan fund has approximately $918,000 of cash available for loans. The fund had approximately $1,804,748 in principal amount of loans outstanding. The total assets of the program were approximately $2,719,814.
As of June 30, 2021, the revolving loan fund has approximately $918,000 of cash available for loans. The fund had approximately $1,804,748 in principal amount of loans outstanding. The total assets of the program were approximately $2,719,814.