Friday, October 5, 2012

Brigham City releases more hotel loan detail

Two weeks ago Brigham City Council voted to approve an application to the United States Department of Agriculture (USDA) to facilitate a $1 million interest free loan for an as yet unnamed hotelier to locate at the city's Academy Square. If the application is approved and the loan is dispersed, the city will be effectively on the hook to ensure its repayment.

"This is not a grant – the money has to be paid back," said Paul Larsen, Brigham City's economic development director.

The USDA's Rural Economic Development Loan and Grant (REDLG) program offers and provides zero percent interest rate loans or grants to qualifying rural telephone and electric cooperatives for use in economic and community development projects. The fact that Brigham City has a population of less than 25,000 and an electric utility cooperative initially qualifies the city for the loan program, according to city officials and the USDA's rural development website.

Larsen acknowledged the concern of a developer defaulting on a loan that could leave taxpayers to foot the $1 million bill and explained that the city has plans to protect against this risk. The city would create a "community development project area" in the vicinity of the Academy Square as well as utilize tax increment financing to back the loan in the event of the hotel defaulting. 

The tax increment, Larsen said, would act as collateral for the loan as part of the inter-local participation agreement. This would serve to hold the developer accountable and ultimately ensure that any incentives, such as a $1 million loan with the city's name on it, be performance based. Box Elder News

Related post: If you build it, will they come?