Morenci council wants loan repaid 2011.12.21

Posted in 2011 December

By DAVID GREEN

Morenci city council would like an old loan to be repaid, but the prospects aren’t looking good.

In 2006, the Detroit-based Alpine Engineering expressed interest in building a plant in Morenci’s industrial park to take advantage of the “Renaissance Zone” tax incentives.

The company wanted to get production going before a building could be constructed, however, and made arrangements with the Economic Development Corporation of Lenawee (EDC) to lease the two former M&S Corporation buildings on Salisbury Street in Morenci. 

United Bank and Trust (UBT) loaned EDC money to buy the buildings, but after financing was in place, EDC discovered that environmental work was needed. City council was asked to pay the $23,000 needed, with EDC suggesting the city should take a stake in the project that would benefit its tax revenue.

Council didn’t want to take that approach and instead negotiated an interest-free loan that would come due in December 2011.

EDC made its monthly payment to the bank, but when Alpine left Morenci to expand in the former M&S buildings in Hudson, the cash flow to EDC came to a halt. The $20,304 still owed Morenci was not paid as scheduled.

Morenci mayor Keith Pennington made it clear to EDC and United Bank and Trust that the loan was not dependent upon the success of Alpine’s operation in Morenci. The money was for environmental work only, he said, and not for the purpose of making payments to the bank.

After meeting with representatives from EDC and the bank, Pennington returned to city council with two options. The city could continue to demand full payment which would likely lead UBT to call the note for its loan and take the $32,000 EDC has remaining in its savings. As an alternative, the city could accept a payment of $2,000 and extend the loan for another year. This would allow EDC to continue its efforts to market the property until its cash runs out.

Pennington told council at the Dec. 12 meeting that he’s pleaded his case to everyone who might be of assistance, but he’s made no progress.

Councilor Jeff Bell said it’s his preference to have the entire payment, but it’s probably in the city’s best interest to get what it can rather than risk losing everything. Council member Tracy Schell agreed, pointing out there is still a chance of getting more than the $2,000.

Councilor Brenda Spiess suggested accepting the $2,000 payment, but also requesting a monthly payment of $500 to show good faith. The situation could be reëvaluated in four months.

“And after four months?” Pennington asked.

“It’s better than being told it’s this or nothing,” Spiess said.

Schell said she sees the $2,000 offer as showing good faith.

Spiess’s motion died after a 3-3 tie, but a motion to accept the $2,000 payment passed by a 4-2 vote, with Pennington joining, Schell, Bell and Greg Braun. Spiess and Robert Jennings cast the “no” votes.

After a follow-up meeting with the EDC, Pennington learned of another option for council to consider at the Jan. 9 meeting.

He and city administrator/clerk Renée Schroeder (who is an EDC board member) met with the board and were presented with an offer for the city to buy the property at a deeply discounted short-sale rate.

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