'Loan' to MI-C actually not a loan, after all

Mooresville officials now say the nearly $400,000 the town agreed to loan MI-Connection in March to help the system overcome a budget shortfall isn't a traditional loan, after all, rather a straight budget allocation.

Director of Finance and Administration Maia Setzer informed town commissioners at their monthly meeting Monday night that the $396,415 they agreed last month to loan MI-Connection, supposedly for repayment by 2015, cannot serve legally as a traditional loan with established repayment terms.

MI-Connection cannot technically borrow money, she said.

Setzer said the interlocal agreement that the town entered into in order to purchase the system in 2007 allows an exchange of funds from other legal entities to provide funding for MI-Connection, but it does not allow MI-Connection to borrow money itself.

"MI-Connection is not a legal entity that can borrow money," she said.

In addition, Setzer said Tuesday that town officials looked closely this month at the interlocal agreement as they were trying to determine how to set the repayment terms for the loan, but they came to the conclusion that those terms were already set.

The interlocal, she said, already dictates the terms by which MI-Connection can be given, and must repay, funds provided by the towns of Mooresville and Davidson. Mooresville confirmed its conclusions in discussions with bond counsel.

According to the agreement, if MI-Connection cannot pay its operating costs, then Mooresville and Davidson "agree to the extent of their respective financial interests … to provide to (MI-Connection) on a timely basis any and all funds necessary to operate the system."

The agreement then details the allocation of profits and losses, distributions, and liquidation of the system and how that money will be repaid to Mooresville and Davidson based on their percentage share of the system.

Therefore, said Setzer, there is no place for additional repayment terms because the repayment terms have already been established by the interlocal.

"We provide whatever money MI needs to make up any shortfall they have, then when they make money, they return money to Davidson and Mooresville based on the interest at that time," she said.

The assumption, said Setzer, is that "when they start turning a profit, they would do so consistently. You may not get it back in one year, it may take several years, but eventually you will get back all that you put into it, and perhaps more."

Although providing the nearly $400,000 to MI-Connection may not feel like a traditional loan, said Setzer, "in technical terms, I think it is. It's going to be paid back when (MI-Connection) turns a profit."

Also at Monday's meeting, the board:

*Agreed to table for 30 days the Planning Board's request for an ordinance to repair broken pane glass windows at 132 South Main Street, formerly History's Tavern, which is now owned by Old Downtown, LLC.
Old Downtown's representative, Howard Kosofsky, asked the board to allow him 30 days to work out a suitable solution with town staff in lieu of the town repairing the window and then putting a lien on the property for the cost of the repairs.
"If we sit down and make this work, it would be a lot better than serving a town lien on a developer who has invested a lot in downtown," he said.
Kosofsky pointed out that his company has renovated several downtown buildings but has limited funding for the repairs at 132 South Main. He said Old Downtown, LLC will upgrade the building as soon as a tenant is secured. It is currently for sale or lease.
*Approved funding for the CATS 83X commuter bus for the first six months of the 2010-11 fiscal year, as expected. The funding, which will pay for the use of three buses, will be approximately $25,000. The board said it might consider funding for the remaining six months of the fiscal year at a later time.