Request to extend City Community Development loan on the Heartland Tech Center between the LAIC and the City of Madison.
Current SituationRequest of new terms
- 3% interest only has been paid to City for 5 years
- LAIC has paid the City approximately $41,700 in interest payments
- Principal amount is $287,500 -- no payments on principal have been paid
To date nearly 60 jobs have been created at the Heartland Technology Center. The initial intent was to build a spec building that would create jobs and bring a new company to the community utilizing DSU students.
- Would like to extend the loan for 15 year term w/10 year balloon
- Principal amount would be for $280,000
- 4% interest
- Monthly payments of approximately $2,100
- New payment schedule to begin on January 15 2011 as a ACH into City account.
The facility mission was reestablished and it became an incubator for new entrepreneurs and businesses. InfoTech, Logic Lizard, SBS, CAHIT, and the 2010 Research Center are a few of the businesses that have been housed at the facility.
In January of 2011 SBS will be graduating from the incubator and moving into a new facility, Washington Plaza II, and creating 40 new positions over the next several years. We are currently working on an expansion of one of the new tenants to take the existing space.
The mission of the incubator is to provide affordable space for a business to grow and mature. That has been accomplished and continues to work as designed.
The LAIC makes this request on behalf of job growth and job sustainability for Madison.
Note that this request appears to make $7500 in principal just disappear. Are we taking that out of the LAIC's annual tax subsidy? And while I'm thinking of it, did we ever get that budget Commissioner Abraham requested last summer? That budget would probably help us understand why the LAIC needs to change the conditions under which we loaned them the money for this project. But no: the LAIC likes to talk in vague inklings and passive voice and expect us to hand them more money at their whim.
I suppose I should be relieved to see that, if you want money from the LAIC, you at least won't be expected to write complete sentences in your proposal.
With so many tennants in the Tech Center over the years, somebody must be paying monthly rent. Does the rental income go to the City or LAIC? Is the rental income being used to reduce the debt or pay ongoing LAIC expenses? If it isn't repaying the debt, aren't we robbing Peter to pay Paul?
ReplyDeleteThe recent housing crisis was caused in part by interest-only home loans in which no principle was paid to reduce the debt. When the value of the homes plummeted, lenders were stuck with undervalued, over-extended upside-down loans.
Taxpayers are certainly entitled to know where the money goes since LAIC receives City subsidies and federal and state grants for infrastucture development. Transparency would build a wider net of trust and support for local development.
If it functions anything like the incubator out here in RC, the rent barely covers utilities and facility upkeep. Not enough to put one cent towards either interest or principle of the loan.
ReplyDeleteTony, you make me realize I didn't do the math on those payments. $2100 shouldn't be hard to meet if you have four business clients paying rent. But then over the past five years, they've paid $42K—that's about $700 a month. So is the LAIC saying they expect more revenue to start flowing at the building in 2011?
ReplyDeleteThe LAIC had an extra $5,000 laying around though to fund the proponents of the new high school renovation/gym project though.
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