8. EDSR 12-10-2007 - Laserfiche WebLink

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Princeton Union Eagle -Thunder Alley default shakes loan lenders Page 2 of 4 A year and a half later, in December 2006, the city received the news that Thunder Alley was no longer open to the public. City council member Lee Steinbrecher, whose business is commercial painting, admits that when he saw how the paint job on the Thunder Alley building ended a number of yards from a front corner of the building, he got to worrying about Thunder Alley's future. City staff members contacted the city attorney for recommendations on collecting on the city's defaulted loan to Thunder Alley. The bad news was that the amount of money Thunder Alley owed the bank in Elk River exceeded the value of the building and contents so there was nothing left for second or third mortgage holders. The bank got first dibs on recovering any loss. Voss told the Union-Eagle on Monday that the ECRDC and the city were second mortgage holders in the project. Princeton City Administrator Mark Karnowski, when asked if it was wise to have lent for the project in the first place, said that city staff members were looking at getting diversified types of business. The Thunder Alley default was the second of two big loan losses for the city within about a three decade period, according to city finance officer Steve Jackson. The first big default was when the ownership of George Mall (later renamed Princeton Mall) that had borrowed $325,000 from the city, only paid about $25,000 of that back. The loan money had come from a $400,000 federal Urban Development Action Grant (UDAG) to the city. While the approximately $300,000 in lost UDAG money was not city taxes, it was still tax money that accrued out of the federal taxes people pay through deductions from their paychecks. The questions, the lessons When Blake was asked about the default, he responded that the questions are valid. The city's "EDA made the best decision possible at the time," he said. "It's not fair to criticize these decisions. You can always go back and say, 'You should have done this and you should have done that."' City staff members are disappointed the Thunder Alley business didn't work out, Blake said, and then added that the city continues to move forward to try to improve its economy. But is there a lesson for dealing with future lending requests? "We need to continue to draw on the experts to analyze business plans," Blake responded. Blake said that people who seek loans for businesses are required to submit business plans. '"I see business plans, a lot of start ups, a lot of projects that are clearly not thought out," Blake continued. The city still has to continue relying on EDA people to analyze such plans and "since I've come here, I've enlisted the help of the Initiative Fund," Blake said. The Initiative Fund (IF) has a revolving loan fund, just as does the ECRDC and the IF has a "superb staff of business loan underwriters," Blake said. "My job as a community development director is to make sure the public interest is best served." People looking at the defaulted Thunder Alley venture can "second guess" the decisions to loan money for it, but there could have been multiple factors why it went under, Blake continued. One factor, Blake suggested, were the rising gas prices, causing people to lose interest in driving from the Twin Cities to Princeton to use Thunder Alley as a conference and recreational facility. Blake also stated that Stoddard "lost everything too." http ://unioneagle. com/index.php?option=com_content&task=view&id=415 &Itemid= l 10/26/2007