Agenda Item Title:
Authorize Mayor and Finance Officer to Refinance County Lease with Black Hills Community Bank
Origination Group:
Legal & Finance Committee
Origination Meeting Date:
01/10/2018
City Council Hearing Date:
01/16/2018
Staff Contact:
Pauline Sumption
Agenda Item Summary:
In December 2010, the City signed a sublease agreement with Pennington County for our interest in the Public Safety Building, Evidence Lab, Parking Ramp and Energy Plant. At the time of the agreement, the effective interest rate was established at 4.111% for 30 years for an annual payment of $290,058.47. Subsequent to that agreement, the Federal Government went into sequestration and part of that was reducing and/or eliminating the interest refunds for the Build America Bonds. This action effectuated the need for a new sublease agreement to better reflect the interest rate that the County would be paying on their debt, which would cause the City’s annual payments and the interest rate it was paying to increase. If we were to sign this agreement as presented, the interest rate would range from 3.6% in 2018 to 7.3% in 2040 with annual payments up to $428,721.34. By refinancing with Black Hills Community Bank, the interest rate would be a flat 3.04% with annual payments of approximately $286,200 for five years. At the end of five years, the City would need to refinance the balance.
Funding Source & Fiscal Impact (if applicable):
| Funding | Cost Center |
|---|---|
| CIP Fund – this will provide for level annualized payments and interest expense, lowering the overall cost of the county lease payments | |
Recommendations:
Origination Recommendation Action:
Approve