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BANKING INDUSTRY: ‘THANKS, BUT NO THANKS…’

In preparation for the March 15th referendum on the purchase of Peary Court, the City sent out requests for bids to various banks. The City retained PFM, Inc [Public Financial Management] to help collect those proposals that would provide information on how the City would finance the 55 Million dollar purchase.

However, only one bank was interested. But even that bank, Centennial Bank, has rejected one of the fundamental conditions for the deal: The City wants the loan to be secured only by the rent roll and the property and it’s spelled out that way in the referendum. However, Centennial is offering to lend the money only if the loan is backed by a “general obligation of the City of Key West.” In other words, taxpayers would guarantee the loan together with whatever assets the City possesses.

Another point of interest:  Housing Authority Executive Director, Manny Castillo and Commissioner Jimmy Weekley presented two financial analysis [proformas] at public meetings including one that would allow 25% of the 2-bedroom units to be rented at the low-income rate [$1571/month] and 25% at median-income rate [$1965/month] along with the the initial proforma showing all 157 units renting for $2358/month [the “moderate-income affordable” rental cap which is more-or-less market rate]. The Request For Proposal [RFP] sent out to the banks, however, did not ask for a proposal on the lower rent option.  Arguably, the banks might get even more skittish if they are presented with an operating income that has been driven down by lower rents.

Mark Finigan, the City’s Finance Director, has informed City Commissioners that he has asked PFM to provide information as to why the banks are shunning this financing opportunity.

Peary Court was purchased approximately two years ago for around 35 Million dollars.  The property (minus several acres that would be retained by the current owners) is now being offered to the City for 55 Million.

A committee will meet on February 5th to discuss their recommendation. The issue is set for discussion during the February 17, 2016 City Commission meeting.

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Here is the Centennial Bank proposal.

 

COMMENTS:

Contra Puncto: “City commission can’t do anything by itself.  It can’t think  without a
consultant.  It can’t decide anything right.  It can’t even collect
proposals without hiring somebody with our money!  Banks not interested
in Peary Court because banks are not idiots.  But commisioners…..
Anyway the city should not provide any houses for anybody because it is
not a government job to provide houses.  Cheap houses are not in
constitution.”

 

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