Ketchum City Councilman Steve Shafran announced this week he plans to loan the Ketchum Urban Renewal Agency $1 million to help the new local entity find its legs.
It's an uncommon gesture but, according to Ketchum City Administrator Ron LeBlanc, not unsuitable.
"It is unusual," LeBlanc said. "But I should also say it's not inappropriate. Steve has done everything humanly possible to make sure there's no inference of impropriety. This is a squeaky clean deal. It's all aboveboard and an honest transaction."
Shafran stressed that he is not lending money to the city.
"The city is not guaranteeing the loan," he said.
Rather, it is a loan to the URA that must be paid back by the URA. The terms under negotiation are for three-year, interest-only payments and two, one-year extension options with a possible 4.5 percent interest rate, which is 0.3 to 1 percent lower than the market rate, according to Ketchum City Attorney Ben Worst.
The chain of events that has resulted in the Shafran loan goes back to last year when the URA was being formed. The agency is a moneymaking mechanism afforded to cities that designate 10 percent of their tax bases as part of urban renewal districts. In Ketchum, the 10 percent Urban Renewal District translates to 836 properties.
Inside the boundaries of that district, the city will receive money from increases in the tax rolls that occur through new development or inflation. The URA will expire in 24 years, but projections indicate the agency could garner $20 million as its total gross earnings through the mechanism over that time period.
When the URA expires, the property taxes will revert to Blaine County.
The goal is "to create a municipal environment that is competitive," Shafran said in an interview last spring. "The URA's mission is to create the resort environment that makes it competitive in Ketchum's own way."
The URA has a board of directors, and that board is one and the same as the Ketchum City Council. That is why Shafran is resigning from the URA board but remaining on the City Council for the time being.
The newly formed URA combined with a new Ketchum Community Development Corporation, a private non-profit created by the city, makes the city's political landscape trickier to figure out than in years past. But LeBlanc said it should open doors.
"You're right. It does complicate things," LeBlanc said. "But it provides for more flexibility in the future. The URA can do things that the city can not. Even though it seems that we're making more complicated mechanisms, it really is providing more flexibility in ways to manage funds and more flexibility with how to manage projects."
Had Shafran not offered the loan, "it wouldn't have changed anything we've done so far," LeBlanc said. "What would have happened is we would have secured a loan for the same amount from a bank or from another individual, anyone who was looking for bank-qualified, tax-exempt financing."
Shafran has hired an attorney to negotiate his end of the agreement. Ketchum City Attorney Ben Worst is negotiating on behalf of the city.
"There's been nothing formally done yet," Shafran said. "But we've begun the process of working on loan documents."
The first URA disbursement will arrive in January 2008, but the amount to be disbursed is in question. Calculating that figure will be an additional layer of work for the county assessor, and both Mayor Randy Hall and Shafran have said the city is interested in obtaining a dollar figure for that first disbursement as soon as possible.
That said, the city has already borrowed against the money that it will earn through the URA. Earlier this spring the Ketchum City Council—and in its capacity as the URA—voted unanimously to spend $3.2 million to purchase the Mountain West Bank property at the corner of Sun Valley Road and East Avenue to prepare for construction of a town plaza on East Avenue between Fourth Street and Sun Valley Road.
The City Council and URA actions were interdependent actions. The council voted first to authorize the transfer of $640,000 to the URA as earnest money for the property acquisition, and conditioned the vote on the URA's approval of a resolution to finance the entire property.
The $640,000 constituted a 20 percent down payment.
Under direction from city leaders, the bank will loan another 30 percent of the financing in six months and the remaining 50 percent upon the project's completion, LeBlanc said.
The initial $640,000 should be repaid, however.
"I would anticipate, and I can't predict the future, that the URA will reimburse the affordable housing fund for that amount of money," LeBlanc said.
In the meantime, the city is patiently waiting for URA money that will come, LeBlanc said. And the city is borrowing in the knowledge that it will come.
"As with anything new—and especially anything this complicated—it's going to take a while," Hall said in May. "But when the big check comes in, probably in year three, people aren't going to care anymore."
Worst stressed that no decision has yet been made, and nothing is firm apart from Shafran's resignation, which will facilitate further negotiations.
"This is an opportunity to authorize the executive director to negotiate the terms of the loan and to finalize the loan documents," Worst said. "Any decision will have to be made by resolution in an open public meeting."