Councilman Grif Chalfant convinced a majority of his colleagues to attempt to negotiate with the bank holding a $4.2 million loan for a city agency.
Bank of North Georgia has asked Marietta to guarantee $225,000 or 18 months of interest payments.
The City Council will now ask the bank to up that term to 42 months.
In 2006, the city gave $2.1 million to the Marietta Redevelopment Corp., a tax-exempt nonprofit formed by the City Council. The city pays the salaries of redevelopment corporation’s director.
The MRC used that seed money to secure the bank loan. That money was used to buy blighted duplexes off Power Springs Street across from the Hilton Marietta Conference Center.
About eight acres of vacant lots and properties with aging houses were purchased for $4 million.
Chalfant said the city is still feeling the effects of the Great Recession and more time to back the loan is beneficial.
“I have faith in our city and our ability to bounce back from the disastrous real estate market, and I think if we have close for four years to do it then we’ll be making headway,” Chalfant said.
The bank’s request for the city to guarantee some interest payments came just before Marietta voters gave the city the go-ahead on a $68 million bond that will also be spent on buying and tearing down aging apartments to set the stage for redevelopment.
The MRC is up to date on its payments but still owes nearly $4 million on the loan, plus $12,500 in interest payments each month.
The properties purchased by the MRC are valued at about $883,000, MRC chairman Ron Francis told the MDJ in August. That’s much less than the city’s $2 million investment.
There is fear among some council members that if the city doesn’t back the interest payments, the bank could foreclose on the MRC’s properties.
Council split on decision
Tumlin cast the tie-breaking vote bringing the tally to 3-2 in favor of approaching the bank for the extension alongside Chalfant and Councilmen Johnny Sinclair and Jim King.
Councilwoman Annette Lewis and Councilmen Andy Morris and Anthony Coleman voted no. Councilman Philip Goldstein abstained from the vote because he owns stock in Synovus, the parent company of Bank of North Georgia, though it is less than the state’s reporting requirement.
The MRC board still has to agree with the city’s plan and the bank has not officially approved anything. The MRC meets at 3 p.m. on Wednesday at First Landmark Bank, 307 N. Marietta Parkway, Marietta.
Tumlin told the MDJ earlier this month that he questioned Chalfant’s proposal because the city did not bail out other developers whose projects failed during the economic downturn.
He changed his mind.
“Mine was a heck no with a capital ‘N,’ but I got more confident as we talked about could we do this as a loan to them,” Tumlin said.
He was concerned about the city taking on the MRC’s liability but said any agreement will have “intricate wording” to ensure it’s not liable for the loan’s principle — just the $225,000 in interest.
Tumlin hopes spreading out payment over 42 months will help the city recover the $2 million it initially sunk into the MRC’s projects.
“It was a hard decision … I honestly think it’s good for the city to give it four more years and also to solidify the other projects going on,” Tumlin said.
There’s little chance, Tumlin said, the city would recoup its investment if it opted not to pay the interest.
“It has no chance if they foreclosed on it,” Tumlin said.
Morris, who voted against requesting the extension, said he couldn’t justify the expense.
“We’re on a tight budget right now,” Morris said. “I just didn’t think we should put any more money into it.”