City lets Homecrest defer principal
The Wadena City Council agreed to let Homecrest pay interest-only on a Minnesota Investment Fund loan during the first year on a 10-year loan.
In a letter from Dean Uselman, economic development director, to the city council, Homecrest was looking for ways to cut expenses in the first year because it is required to pay the real estate taxes payable in 2008, due to the JOBZ subsidy agreement not being signed until after July 2007. The real estate taxes will be between $180,000 and $200,000 for both buildings in 2008.
The interest-only payments on the MIF loan during the first year will cut some of the expenses.
There is a risk in doing this, in that if Homecrest defaults, the city will have received less principal payment, Uselman said in the letter. However, there are also benefits. The city will be helping the company with cash flow in the critical first year and the city will receive an extra $7,000 in interest during the term of the loan.