Staff recommends Council approve and adopt the Resolution to allow city staff to pursue financing options in compliance with IRS regulations for the new city hall renovations.

In October 2021, the City purchased the former federal courthouse building previously known as the Stillwater Building in order to renovate it to make it suitable for use as a new city hall. There are federal and state historic preservation tax credits available under the law to incentivize preservation and renovation of historic structures. Historic preservation tax credits allow third parties to invest in qualified preservation and renovation projects in exchange for federal and state historic preservation tax credits.  

On November 28, 2022, Council approved the proposal from the consulting firm of Brian Wishneff and Associates, LLC to assist the City in obtaining historic preservation tax credits and related financing, including identifying investors for the new city hall building. The City has been advised by Wishneff as well as the State of Montana Historic Preservation Office that all or a portion of the project is eligible for federal and state historic preservation tax credits.

On December 19, 2022, Council approved that city staff move forward with the full build-out of the new city hall building.  The total cost of the project is estimated to be $43,231,624. The City will need to fund an additional $26,931,624 - $30,431,624 to complete the project.  Council has indicated its intent to pursue historic preservation tax credits to partially fund expenses of the renovations. This resolution will establish compliance with reimbursement under Internal Revenue Code for expenses currently being incurred with existing cash on hand.

Therefore, Council must authorize city staff, in consultation with bond counsel, to obtain historic tax credit financing proposals and lease purchase financing proposals for the project and engage in negotiations with potential investors and financial institutions. Once a favorable proposal is received, city staff will negotiate an agreement with suitable terms and conditions to submit to Council for approval.  
 

City Council may:

• Approve; or,
• Not Approve

This resolution will not result in additional costs. However, this resolution will allow for the City to pursue historic preservation tax credits and finance some improvements through lease purchasing. Future council action related to these items will occur, at which point there may be direct fiscal effects. At this point in time, the benefit of historic tax credits is estimated at $3-$4 million, but final amounts are not known until review is completed by the State Historic Preservation Office. Future costs associated with financing are not known at this point, as the total amount to be borrowed is not known. At this point in time the estimated amount needed for borrowing will be $6-$10 million, largely dependent upon how much is received for the current City Hall and the amount received for historic tax credits.