HomeMy WebLinkAboutLoan Agreement for Clean-Up of Blast-Damaged Property
Commission Memorandum
REPORT TO: Honorable Mayor and Commission Members
FROM: Anna Rosenberry, Finance Director
Greg Sullivan, City Attorney
Chris Kukulski, City Manager
SUBJECT: Loan Agreement for Clean-Up of Blast-Damaged Property
MEETING DATE: April 20, 2009
RECOMMENDATION: Listen to presentation and direct staff regarding the creation of a blast clean-up loan
agreement.
BACKGROUND: The City Commission, in response to a request sent to the City Manager, directed staff to
bring forward financial assistance options to expedite the clean-up and removal of debris at the blast site.
Nothing in the Montana Constitution, the City Charter, the Montana Code or the Bozeman Municipal Code
prevents the City from creating such a loan.
Because a program of this sort would loan public money directly to private property owners, a determination of
public benefit needs to be established. Protecting and enhancing the economic vitality of the downtown area is
an overarching theme in the City's growth policy and the Downtown Urban Renewal Plan. The economic
health of the downtown contributes to the overall health of the community. Cleaning the blast site as quickly as
possible is important to the economic recovery of the area. Additional benefits include the City's avoiding
potential claims that the site would be considered blight or a public nuisance.
Funding Options:
Investigated, but not allowed:
· HB645 Stimulus Dollars: Under the currently proposed formula, the City of Bozeman will receive
$621,000 in stimulus money if this bill is signed by the governor. The timing of receipt of the
money and specific program requirements are not known at this time. As of a couple days ago, each
City had line-item projects that the money could be spent on and the bill had been amended to
include "Debris Removal" for Bozeman, Miles City, and Whitehall. However, recent amendments
have removed the specified projects and replaced them with a general description of what the money
can be spent on. Under the newly amended description, clean-up of the blast site would not qualify.
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· Special Improvement District's (SID): Montana Code does not allow the creation of SID's for debris
removal or any other purpose we could identify that would allow this work to be funded through an
SID.
Possible, but not likely:
· State of Montana Board of Investments - Infrastructure Loan Program: After speaking with the
program administrator, it appears that a loan could possibly be funded through this program,
dependant on our ability to meet the requirement that the loans benefit "basic sector businesses with
50% or more of their revenues coming from outside the state of Montana." Also, the only debris
removal allowed under the program is "removal of debris for parking." He indicated that it is a very
competitive loan program; there's not enough money to fund all requests. The program administrator
would not say that it wouldn't be approved, just that it would be very difficult to qualify.
· Department of Commerce: The Department did not have a program that would be able to fund loans
for clean-up of the debris. They indicated that our local CDBG - Economic Development Revolving
Loan Fund may be a source of money. The City's fund is administered by Prospera and currently
has $67,000 of un-loaned money, with an additional $13,000 flowing in each month in the form of
principal and interest re-payments. Criteria for these loans include demonstrating that a high
percentage of revenues come from outside the County, job creation will occur as a result of the loan,
and 1:1 matching funds are available.
Recommended Option:
Loan from the General Fund Reserve requiring full pay-back:
· The City's adopted fiscal policy for the general fund reserve states: "The City is subject to revenue
shortfalls and unexpected expenditure demands during the fiscal year. An undesignated general
fund reserve will be maintained to be able to offset these revenue shortfalls or meet unexpected
demands occurring during the year, without suddenly adjusting tax rates or reducing expenditures."
· The Charter, and Ordinance No.1729 "Budget Administration", requires a minimum level of
General Fund Reserve to be budgeted each year. Both the Charter and the Ordinance exclude the
minimum "in cases of emergency, pursuant to state law."
· We could loan up to $250,000 in FY09 and still be in compliance with the minimum reserve level.
The established minimum is 12% of fiscal year revenues.
Ordinance Minimum, 12 %
of FY09 Revenues
$2,506,440
· Current Estimated General Fund Reserve for Fiscal Year End June 30, 2009:
General Fund Estimated Unreserved Fund Balance, End of FY09
FY08 Ending Unreserved Fund Balance $4,519,814
Plus: FY09 Budgeted Revenues 22,287,851
Less: FY09 Budgeted Appropriations, amended (23,161,276)
Plus: Spending Plan (no PD & Fire) 83,000
Less: City Hall Value Decrease & Commission (804,000)
Less: Air Handler (recovered in FY10 CIP Cut) (75,000)
Less: Proposed Blast Loans (250,000)
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Revised Projected Unreserved Fund Balance $2,600,389
As a % of FY09 Revenues 12.4%
In calculating the above estimate,
· We included the effects of FY09 approved budget amendments.
· We included the estimated mid-year savings from staff budget adjustments. Based on some
Commission discussion about decreases to the public safety portion of our mill levy, we
excluded the police and fire department savings amounts from the calculation.
· Based on our most recent appraisal, we have decreased the reserve by the decline in appraised
value of the Old City Hall property and by the amount of commission we are under contract to
pay for its sale. To be conservative, we took the lowest value found by the appraiser (now
$900,000), compared to its previously appraised value of $1,650,000.
· We included the amount of the Swim Center Air Handler Bid that exceeds Morrison Maierle's
original estimate. We plan to recover this amount by deleting one of the lowest-scoring CIP
item in FY10 (Park Bathroom Replacement), but this still effects the FY09 Ending Unreserved
Fund Balance.
· We included $250,000 to fund Proposed Blast Clean-up Loan(s).
Suggested Loan Terms:
Because this money is potentially being taken from the General Fund Reserve, we recommend the city provide
the money directly to the affected property owners through a loan backed by adequate security, which requires
payment in full.
In their letter of request, the property and business owners write: "it would be agreed that any insurance money
and money recovered from the liability of the explosion would be paid back to the fund."
FISCAL EFFECTS: A loan agreement funded from the General Fund would decrease the Unreserved Fund
Balance in the year the loan is made by $250,000. Our General Fund Unreserved Fund Balance, end of FY09
would be $2,600,389; corresponding to 12.4% of FY09 Revenues. When repayment of the loan is received, the
Unreserved Fund Balance would increase by the amount of the payments.
ALTERNATIVES: As suggested by the City Commission.
Respectfully submitted,
Anna Rosenberry, Finance Director Greg Sullivan, City Attorney Chris Kukulski, City Manager
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