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Horace council gives Sparks Addition extra time as bank appraisal pending
Summary
Council allowed Sparks Addition to continue in the bond package while awaiting a bank appraisal and letter of credit, setting a final deadline for documentation before closing. Developers and the bank said the appraisal could be completed within about 10— days; staff warned of repricing risks if the LOC is not in hand before closing.
The Horace City Council voted May 27 to continue processing the Sparks Addition bond package while the developer secures a bank letter of credit (LOC) required for closing.
City staff said the banks committee has approved a principal LOC for $4,300,000 plus a contingent LOC of $330,000, but issuance is pending the banks formal appraisal. Brenton, city staff, told council the appraisal is the one outstanding deliverable and that the bank has indicated it can expedite the report. The council discussed options including a partial collateral deposit in the interim, contingency funding and the timing of closing.
Developers told the council they have arranged additional collateral and that their banks president had signed a supporting letter; a developer representative said the banks appraiser estimated 10— days to deliver the formal appraisal. City staff warned that if the LOC is not in hand before bond closing, the package would likely require repricing, which could raise interest costs.
After discussion, the council adopted a motion to allow continued processing on the condition that a completed due diligence package, final survey and letter of credit be received no later than June 24 (the council recorded an expectation that final items be in hand before closing around June 25). The motion carried by voice vote.
The council did not approve a formal waiver of requirements; staff said legal counsel would advise on any actions if the LOC arrives later than the deadline. Speakers who opposed expedited relief raised concerns about perceived preferential treatment for individual developers; council members noted the developer had put up additional collateral and that bank leadership had represented the appraisal as routine.
Next steps: staff will accept the LOC and related due-diligence items if submitted by the June 24 deadline and will advise council if bond-pricing or other terms must be renegotiated.
