LeMay Automobile Museum officials, hampered by the frozen credit market, are turning to the City of Tacoma for money.
City and museum officials outlined a plan Tuesday in which the museum would borrow $3.5 million from the city and leverage the money with other funds to build the first phase of the planned Harold E. LeMay Museum near the Tacoma Dome.
The money would come from the U.S. Department of Housing and Urban Development’s Section 108 loan program. Tacoma would borrow the money from HUD and re-lend it to the museum.
Tacoma has participated in the Section 108 program for about 20 years, but has not made a loan from it in about three or four years, said Martha Anderson, assistant director of the the city’s Community and Economic Development Department.
That’s because private markets were providing a sufficient flow of funds, and the program comes with enough rules that borrowers don’t use it unless they have to, Anderson said in a meeting of the City Council’s Economic Development Committee.
David Madeira, museum president and CEO, told the council committee members that the museum tried to get financing for the new building last May and was told there was no money. Officials began looking for other options and discovered “new market tax credits.”
The New Markets Tax Credit Program is a separate federal initiative that would provide another piece of the funding puzzle. That, combined with a Section 108 loan — as well as private bank financing — would allow the museum to move forward with construction on the $28.4 million first phase.
“This is a big piece of the picture to us,” Madeira said.
Museum officials hope to apply for a building permit next month and begin construction in August on a 150,000-square-foot building that would hold 600 cars on display.
The museum would have up to seven years to repay the loan, although the plan is to repay it much sooner, said John Finke of the National Development Council. The city contracts with the NDC to help access federal loan programs.
The loan’s interest rate would be tied to the London Interbank Offered Rate, plus 70 basis points, Finke said. At today’s rates, it would be 2 percent, Finke said.
The loan would be secured by the museum building and land, pledges from a capital fund-raising campaign, and cars from the museum collection, he said.
“The autos are very liquid and worth a lot of money,” Finke told council members.
Harold LeMay amassed the world’s largest private automobile collection before his death in 2000, with more than 3,000 cars, motorcycles and other vehicles. The collection that bears his name currently consists of more than 2,000 vehicles.
The City Council is expected to vote next month on whether to apply for the loan. Once HUD approves, the council would vote again on whether to accept the funds.