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TO: Mayor Richard C. Irvin
FROM: Chris Minick, City Treasurer - Chief Financial Officer
DATE: June 3, 2022
SUBJECT:
Renewal Of the $10 million Line of Credit (LOC) with Old Second Bank
PURPOSE:
To approve the renewal of the $10 million Line of Credit (LOC) with Old Second Bank for one year.
BACKGROUND:
The City initially approved LOCs with Old Second Bank and Fifth Third Bank in 2019 for $10.0 million. The City has used the LOC's to provide short-term financing for the City contributions to various land acquisition and economic development projects when bond financing is not practical. Staff anticipates that there will be additional need for short term financing of economic development projects in the future and the LOC's provide a practical and cost effective vehicle for those needs. The City makes periodic payments on the LOC's as appropriate when long term bonds are issued.
Each LOC is renewed separately, and the Fifth Third renewal will be presented at a future Finance Committee meeting. The LOC may not be used for any project not specifically approved by the City Council.
DISCUSSION:
The attached table shows the activity of the Old Second Bank LOC. The current balance on the LOC is $7,883,408. The LOC is anticipated to be reduced by payments from the recent GO Bond Series 2022B. Additionally, the City will also receive repayments from developers from various costs initially financed by the City, primarily related to historic preservation tax credits. Once received, we will apply these payments to the LOC used to initially finance the short-term timing difference between construction costs and repayment of these credits.
The renewal LOC, has slightly different interest rate terms due to the elimination of the London Interbank Loan Rate (LIBOR) on which the expiring LOC interest rate is based. The rate for the renewed LOC will be based on the 30-day Secured Overnight Financing Rate (SOFR) + 200 basis points (2%). SOFR is a published rate a...
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