In 2008, the City of Billings provided $500,000 in grant funds to support the development of Southern Lights, a 20-unit multifamily affordable rental housing project located in the South Side neighborhood. Southern Lights is currently undergoing repairs supported by the Montana Department of Commerce (MDOC) with additional HOME Investment Partnership program funds. The City’s interest in the property expires after a 20 year affordability period; May 5, 2028. If the project remains compliant for the entire period of affordability, the City’s interest is forgiven.
 
The MDOC requires the City to subordinate their collective interests in the property in order to provide the financing for the project, as MDOC’s total investment in the project exceeds the City’s interest.

City Council may:

• Approve, or;
• Disapprove the Subordination Agreement.

There is no financial impact to the City as a result of this transaction as the City will retain its $500,000 interest throughout the affordability period. Southern Lights is currently valued at over $4 million and the total liens on the property with this subordination would be $1,259,900. 

Staff recommends City Council approve the proposed Subordination Agreement and allow staff the authority to negotiate and sign the Agreement to support additional financing to sustain the project.