Bay St. Louis government will be shopping around for a $1 million loan to satisfy an obligation that comes due this summer, city officials said recently.
Municipal Clerk David Kolf said the city faces an impending payoff on a loan made through the Mississippi Development Authority. He intends to negotiate with banks for the best available interest rate.
After Hurricane Katrina, the city borrowed $4.27 million from MDA to purchase the old Coast Electric complex on U.S. 90, to be used as a new City Hall, police department, city yard, and conference center.
Since then, the city received Community Development Block Grants to cover the majority of the loan, but still owes about $1 million on the note. The MDA note is due Aug. 1.
The city has that $1 million in cash reserves, but would rather borrow the money rather than deplete its reserves. The cash on hand would be kept in a debt service fund and would not be placed in the general fund, Kolf said.
“We need to maintain cash flow,” Mayor Les Fillingame told the City Council last week.
Kolf said he will begin negotiating with banks to try and arrange the loan, which would be collateralized by a portion of the city’s tax millage. He said the city prefers to make payments over a seven to 10-year period.
“We’ve got the million dollars. It’s not a question of being able to pay it. We just feel better keeping it in reserve,” Kolf said.
The note would be a general obligation loan instead of a bond issue. It would involve only the city and a lender, and would not require an underwriter as does a bond issue.
This month, the prime interest rate has been running 3.25 percent, and is projected to stay at that level over the next several months. Lenders often peg loans at the prime rate and then add a specified percentage above prime to the loan amount. Kolf is hoping the city can find a loan with an interest rate around 4 percent or slightly higher. “Nothing is definite yet,” he said.
BY: J.R. Welsh
The Sea Coast Echo