MADC restructures financing that lured Verifications Inc.City's interest-free $500,000 loan will be repaid after 10 years.
By: Tom Lawrence, The Daily Republic
MADC restructures financing that lured Verifications Inc.
By TOM LAWRENCE The Daily Republic
A $500,000 loan the city made to the Mitchell Area Development Corporation in 2006 has helped spur economic development in the city, according to the man in charge of MADC.
In 2006, the city loaned $500,000 to MADC as part of a pool of money the development agency used to construct an office building along the Highway 37 bypass in Mitchell.
On Monday night, the City Council agreed to a restructuring of the loan.
The change will have no impact on how or when the city is paid back, according to Bryan Hisel, MADC’s executive director.
In 2006, MADC borrowed $700,000 from the state Revolving Economic Development and Initiative (REDI) Fund and $200,000 from Area Wide Business Council Inc. It also borrowed $500,000 from the city and $100,000 from First National Bank.
That $1.5 million, along with $500,000 that MADC kicked in, was used to construct the building at 1308 W. 15th Ave. that houses Verifications Inc.
So far, MADC has paid back a total of $200,000 to the Area Wide Business Council and to the REDI Fund.
The REDI Fund loan had to be paid back after five years, so MADC is restructuring the entire loan pool.
It will borrow $800,000 from CorTrust Bank at 5 percent interest and pay off the loans from the REDI Fund, which was made at 3 percent interest; Area Wide Business Council, which was at 5 percent; and First National Bank, which was at 6 percent.
The loan from the city is interest-free and all $500,000 will be paid back after 10 years, Hisel said. That was the agreement made with the City Council five years ago.
The REDI Fund had first claim on the property, and now CorTrust Bank will have the first claim. The city is in the second position, Hisel said.
It’s the second such loan package he has put together in his two decades, and he said it was a win-win deal.
“We get the jobs, the payroll and a new company in our town and at the end of this, we have a new office building in town,” he said.
Verifications, which has 65 employees, according to Hisel, pays the utilities, taxes, insurance and all maintenance costs for the building.
“Verifications didn’t want to buy,” he said. “They wanted to rent.”
The company paid $124,797 annually in rent in the first five years of its lease with the MADC and will pay $157,905 a year in the last five years of the deal, Hisel said.
When the lease ends, the firm will have the option of renewing it, buying the building or moving to a new location.
The MADC still owns the building, which was appraised at $1.6 million in October.
Ross Dolan/Republic The Verifications Inc. office at 1308 W. 15th Ave. in Mitchell is pictured Friday.