The Lano City Council voted to accept a $3,500,000 grant and a $3,500,000 loan from ARSFCGL 2 LLC to support a dam reclamation project that could include raising the height of both city dams and related engineering, environmental review and construction work. The council authorized the mayor to sign required documents including a grant agreement, PRI letter, loan agreement, promissory note and escrow agreement.

The funding package is intended to cover permitting, design and, if feasible, construction costs; council members noted the total project cost could exceed the $7 million represented by the two awards. “This will cover any permitting, engineering design, feasibility, environmental impacts, if it’s doable, and then the construction aspects of it,” a council member said during the meeting.

The council was briefed that the loan carries a 2.25 percent interest rate. City staff said interest payments would begin in September, with amortizing payments starting a few years later. The loan documents include a completion date four years from signing; the council discussed language that could put the city in default if improvements were not completed by that date. “If the improvements ... are not completed by the completion date, which is four years from when we sign it, we’re in default,” a council member said. City staff clarified the lender’s intent, saying the lender expects the city to be actively spending on the project and would work with the city where work is underway; staff warned that permitting alone could take two years.

Council members asked about flexibility and risk. A city staff member identified in the meeting as Carol said the lender had indicated it would continue to work with the city if projects were in progress, and that the clause primarily applied when work had stalled and funds were not being spent. Council members noted there is no prepayment penalty, allowing the city to retire the loan early if funding becomes available.

Representatives from the funding entity were described in the discussion as engaged; the council was told the foundation’s representative, Lee Gass, had texted city staff and that the foundation was “excited” about the project and treating the city as one of a small number of pilot locations. Council members said the foundation acknowledged the regulatory and permitting hurdles and had indicated flexibility during implementation.

After the discussion, a council member moved to approve acceptance of the grant and loan and to authorize the mayor to execute all required documents. The motion was seconded by Councilmember Blair and passed by voice vote with no council member recorded as opposed.

The council recessed into an executive session later in the meeting for unrelated personnel matters and took no action on the city manager during that session. The dam grant and loan approvals were completed in open session.

Next steps identified during the meeting included executing the grant and loan documents, continuing coordination with the lender and legal counsel on PRI and escrow documents, and advancing the engineering and permitting work required before construction. City staff warned council the project timetable depends heavily on permitting and environmental reviews and urged ongoing coordination with the lender and legal advisors.