Council members have been torn on whether the city should foot the bill for the interest payments and help a tax-exempt nonprofit formed by the city to avoid default on a $4.2 million loan.
It was a split 3-2 vote in November, with Mayor Steve Tumlin casting a rare tie-breaker that sent the city to the negotiating table with Bank of North Georgia. The bank holds the loan made to the Marietta Redevelopment Corp. to purchase about 8 acres of vacant lots and properties off Powder Springs Street across from the Hilton Marietta Conference Center.
Councilmen Grif Chalfant, Johnny Sinclair and Jim King were in favor of backing the loan.
Bank of North Georgia asked Marietta to guarantee $225,000 or 18 months of interest payments on the loan.
But the City Council asked the bank to spread the payments over 42 months. The bank has now offered a term of 36 months with the MRC paying the first 19 months and the city paying the remainder, which is $221,000.
Chalfant, who has been the city’s liaison to the redevelopment board, said the city hopes the MRC will sell the properties and get the city off the hook.
In 2006, the city gave $2.1 million to the MRC to secure the bank loan. The MRC is up to date on its payments but still owes nearly $4 million on the loan, plus $13,000 in interest payments each month.
Final vote set for Wednesday
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. City Council will vote on approving the final agreements at its meeting at 7 p.m. Wednesday at City Hall, 205 Lawrence St.
Councilman Anthony Coleman says it’s not worth wasting any more money, and there’s little chance the city will see a return on its $2.1 million investment.
“I think I said all along that it’s not the city’s responsibility, and I don’t think the city has a snowball’s chance of recouping that money,” Coleman said.
Chalfant disagrees and says the city has a responsibility to the MRC. The city appoints its members.
“Whether it’s written on a legal page or whether it’s not, the city has some culpability in this whole process with the MRC,” Chalfant said. “We place all the members on the board.”
Mayor Tumlin argues the city is putting less into the MRC than it did in the past. When the group had a dedicated director, the city paid his salary and spent about $200,000 annually on the MRC.
But when that director left, his position wasn’t filled and the corporation was placed under the direction of Beth Sessoms, the city’s economic development manager.
The $221,000 the city has been asked to pay in interest is less than it previously committed, Tumlin said.
“We’re not at arm’s length,” Tumlin said.
The mayor has reversed his position on the topic. In October, he told the MDJ he did not support the city paying the MRC’s loan payment for the same reason the city didn’t bail out other developers whose projects went belly up in the downturn.
“They’re an independent corporation,” Tumlin said of the MRC in October. “Personally, I want to keep it at arm’s length.”
Councilman Philip Goldstein has not previously voted on matters regarding the MRC loan, abstaining because he owned stock in Synovus, the parent company of the Bank of North Georgia, though he had expressed disapproval for backing the loan.
Goldstein has since sold that stock and plans to participate in the discussion at Wednesday’s meeting.
“When you get down to it, I’m probably going to be in the same place that I would be,” Goldstein said.