Staff recommends City Council approve the lease purchase financing and the historic tax credit (HTC) financing resolutions. 

The City, in consultation with Brian Wishneff and Associates, has determined the new City Hall will qualify for the federal historic tax credit (HTC).   City staff have negotiated with a historic tax credit investor, FIB Battin, LLC (the HTC Investor), the terms of a historic tax credit transaction with respect to the project, and have negotiated with First Interstate Bank (FIB), an affiliate of the HTC Investor, the terms of a long-term lease purchase financing for the new City Hall.  The City will form a Montana limited liability company, designated Former Federal Building Manager, LLC (Company), of which the City shall be the sole member, and the City shall enter into an operating agreement with respect to the Company. The Company and the HTC Investor will form a Montana limited liability company, designated Former Federal Building Landlord, LLC (Landlord), of which the Company and the HTC Investor will be the sole members, and the City and the HTC Investor will enter into an operating agreement with respect to the Landlord.   The Company will serve as the managing member of the Landlord.   The HTC Investor will make a capital contribution to the Landlord in one or more installments pursuant to the Landlord Operating Agreement.   The agreements and documents are included in the resolutions.

 The City will also enter into a lease purchase financing with FIB for the purpose of refinancing the Board of Investment lease financing and provide additional funds for the new City Hall project.  The City will enter into a ground lease with FIB to which the City will lease the real property underlying the project to FIB. The City will lease the project and underlying real property back from FIB.  The rental payments shall be payable only from current funds which are budgeted and appropriated for such purpose during the fiscal year. 

Both resolutions must be approved if the City wants to do either transaction. 
 




 

City Council may:

• Approve both resolutions for the lease purchase financing and the historic tax credit financing 
• Not Approve both resolutions and not refinance the Board of Investment lease financing 

The lease financing structure will allow for the City to borrow the needed construction funds to complete the new city hall project. The interest rate for the lease financing structure will be established prior to closing based upon the current FHLB 5/15 amortizing rate plus 200 basis points. As of 10/29/2024 that rate would be 6.252%. This structure will allow for prepayment as funds are available so the amount financed can be reduced. It is estimated that the total amount financed will be $14 million for the project plus the legal and banking costs for the entire structure. The maximum amount authorized to be financed is $14 million.

The historic tax credit structure will provide a gross estimated $7.8 million to the transaction. After consultant and financing fees are paid and a portion of the transaction proceeds are held back for repayment to FIB in accordance with IRS regulations, the net amount to the City is approximately $5 million. The recommendation is to use the proceeds from this transaction to reduce the lease financed amount.