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City considers $2M payment at Civic Center
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McMinnville officials are considering a measure to pay $2 million toward the Civic Center’s $9.2 million renovation and expansion project, bringing the amount borrowed down to $7.2 million.

The $2 million is from a lawsuit settlement between the city of McMinnville and Warren County government over local option sales tax. City officials earmarked any funds received from that settlement toward capital projects.

Originally discussed by the city’s Finance Committee was using $1 million to pay off current debt owed for previous projects and using the remaining $1 million on final bills created by the Civic Center project, bringing the total amount borrowed to $8.2M if the project is within budget.

Finance Committee chair Everett Brock explained during a meeting on Tuesday why that initial idea is not a good one.

“At the last meeting, we discussed taking $1 million and applying it to some loans and taking $1 million and applying it to the back end of the Civic Center renovation,” said Brock. “I had Shirley (Durham) look over all of our outstanding long-term debt and something came up.  The smallest one we had, which runs out in a couple of years, was the City Hall purchase and geothermal at the Civic Center. The first thing we noticed was the interest rate was 3.49 percent. We are borrowing money at 4.17 percent for the Civic Center.”

Brock stated all the city’s existing debt – excluding one loan that cannot be paid off early – has a lower interest rate than 4.17, including the money borrowed for paving that has an interest rate of 2.11 percent.

“I hate to borrow money at 4.17 and pay off stuff that is 2.11,” Brock said. “It just doesn’t make a whole lot of sense. I propose, after we get the loan, we use $1 million to pay the first $1 million worth or bills. Then, if we still want to, we can use $1 million to pay off the last $1 million worth of bills. That would put $1 million on the front end and $1 million on the back end.”

The city has requested permission of the state to borrow up to $10 million for the project. Any unused money can be returned.

“We are required to draw down the entire loan balance over the term of the loan agreement,” said city attorney Tim Pirtle. “What you do with that extra money, if in fact this project comes in under $10 million, we do have an opportunity to pay that unused portion of it back. You’ll pay 101 percent. You’ll pay, basically, a 1 percent fee for the part of the money you didn’t use.”

Alderman Mike Neal stated, “I’m OK with it. Applying that $2 million, saves us $160,000 a year, approximately, over the life of the loan.”

Committee members unanimously approved the recommendation. A resolution will be under consideration by the Board of Mayor and Aldermen on Nov. 13 during its regular session.

Paying $2 million out of pocket is considered a companion bill to borrowing $10 million. Later that night during their regular session, board members tabled two resolutions about borrowing $10 million until Nov. 13.