Regular 5.
Regular City Council Meeting
- Meeting Date:
- 09/14/2020
- TITLE
- Downtown Tax Increment Line of Credit Payment Request
- PRESENTED BY:
- Chris Kukulski
- Department:
- Finance
RECOMMENDATION
The DBP Board recommends approval of payment of Line of Credit to Big Sky Economic Development in full using Tax Increment Financing. Payment of the Line of Credit is outlined in the Strategy Partner MOU, approved and executed by the City of Billings on 4/9/2018 (see attached MOU).
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
In April of 2018, the Strategy Partners executed a Memorandum of Understanding outlining a contribution of $675,000 toward the One Big Sky District Development Plan. In addition to funds committed by the City of Billings, Big Sky Economic Development, the Billings Chamber of Commerce, the Billings Tourism Business Improvement District, and other community leaders, the Downtown Billings Partnership (DBP) agreed to secure a Line of Credit through Big Sky Economic Development in the amount of $400,000 toward the Development Plan. This Line of Credit was secured using the property located at 102 N. 29th, known as the Yesteryears Antique Mall. The property was purchased by the DBP in 2016 through a City Council approved Tax Increment Finance (TIF) grant for the purpose of assembling land intended for a future large-scale development project.
At the time of entering into the MOU, the TIF funds for the Downtown Billings TIF District were allocated to other projects and using the Yesteryears building as collateral was determined to be the best use of the property while furthering the planning effort for development in the urban core. If TIF funds had been available at the time, the contribution toward the planning document, later adopted by City Council, would have been an allowable expense per Montana Code Annotated.
The DBP Board of Directors voted and approved a request of $400,000 from fund 203 to pay the Line of Credit secured through Big Sky Economic, choosing to retain ownership of the property until such a time it can be sold and developed as part of a development strategy as originally intended. The DBP does intend to issue a Request for Proposal (RFP) with the purpose of selling the property to a qualified buyer. Further, the DBP is willing to commit any net revenues from the sale of the property back to Fund 203 to be used for future economic development at the discretion of City Council.
The request for early payoff of the Line of Credit came from Big Sky Economic Development in the following statement, “BSED could use your help in moving forward with our redevelopment project on the Mt Bank Building downtown—our Rock31 project. We have the funding committed for the project, including the federal EDA grant. However, we have to be able to cash-flow this project with BSED dollars and then wait for federal reimbursement. That will make this project difficult. Additionally, we have at least two business expansion projects in the que that will require our financial support through our Opportunity Fund, which was the source of the $400,000 credit to the DBP/City. Would it be possible for the DBP and the City to follow-through on an early, partial payment on the DBP/BSED line of credit? I understand that was the plan, as approved by the DBP Board a few months ago, to make an early payment. Is it possible to get this payment in process over the next 60 days?”
Qualification Citations:
MCA 7-15-4233
(1d) – to undertake and carry out urban renewal projects as required by the local governing body
(1m) – to prepare plans for carrying out a program of voluntary or compulsory repair and rehabilitation of buildings and improvements
MCA 7-15-4288
(5) – costs incurred in connection with the redevelopment activities allowed under 7-15-4233
(9) – the compilation and analysis of pertinent information required to adequately determine the needs of the urban renewal area
City of Billings TIF Policy
5. DBP Line of Credit: By signing this MOU, the City authorizes the DBP to repay the Line of Credit by: (1) selling the Collateral; (2) through tax increment funds generated by the Expanded 27th Street Urban Renewal District; or (3) some combination of those methods.
At the time of entering into the MOU, the TIF funds for the Downtown Billings TIF District were allocated to other projects and using the Yesteryears building as collateral was determined to be the best use of the property while furthering the planning effort for development in the urban core. If TIF funds had been available at the time, the contribution toward the planning document, later adopted by City Council, would have been an allowable expense per Montana Code Annotated.
The DBP Board of Directors voted and approved a request of $400,000 from fund 203 to pay the Line of Credit secured through Big Sky Economic, choosing to retain ownership of the property until such a time it can be sold and developed as part of a development strategy as originally intended. The DBP does intend to issue a Request for Proposal (RFP) with the purpose of selling the property to a qualified buyer. Further, the DBP is willing to commit any net revenues from the sale of the property back to Fund 203 to be used for future economic development at the discretion of City Council.
The request for early payoff of the Line of Credit came from Big Sky Economic Development in the following statement, “BSED could use your help in moving forward with our redevelopment project on the Mt Bank Building downtown—our Rock31 project. We have the funding committed for the project, including the federal EDA grant. However, we have to be able to cash-flow this project with BSED dollars and then wait for federal reimbursement. That will make this project difficult. Additionally, we have at least two business expansion projects in the que that will require our financial support through our Opportunity Fund, which was the source of the $400,000 credit to the DBP/City. Would it be possible for the DBP and the City to follow-through on an early, partial payment on the DBP/BSED line of credit? I understand that was the plan, as approved by the DBP Board a few months ago, to make an early payment. Is it possible to get this payment in process over the next 60 days?”
Qualification Citations:
MCA 7-15-4233
(1d) – to undertake and carry out urban renewal projects as required by the local governing body
(1m) – to prepare plans for carrying out a program of voluntary or compulsory repair and rehabilitation of buildings and improvements
MCA 7-15-4288
(5) – costs incurred in connection with the redevelopment activities allowed under 7-15-4233
(9) – the compilation and analysis of pertinent information required to adequately determine the needs of the urban renewal area
City of Billings TIF Policy
- Permitted Uses of TIF Funds
- Land acquisition and assemblage, demolition and removal of structures, relocation of occupants, analysis to determine needs of an urban renewal area, administrative cost for redevelopment activities
5. DBP Line of Credit: By signing this MOU, the City authorizes the DBP to repay the Line of Credit by: (1) selling the Collateral; (2) through tax increment funds generated by the Expanded 27th Street Urban Renewal District; or (3) some combination of those methods.
ALTERNATIVES
City Council may Approve, or disapprove. Disapproval would require the building be sold as quickly as possible in order to pay the Line of Credit. If the building is unable to be sold, the City would need to use TIF funds to make the payment on 06/30/2021 in accordance with the Strategy Partner MOU approved on 4/9/18.
FISCAL EFFECTS
The full payoff amount will be $409,499.37, $400,000 plus 1.5% interest accrued over the life of the loan. Early payoff of the Line of Credit in full will save $4,947.95 in interest. Budgeted Development Incentives for FY21 allow for the full payoff of the Line of Credit while allowing for future additional project allocations within the District. The future sale of the property will result in funds being returned to the TIF District.