As the Monadnock Economic Development Corp. navigates a difficult financial situation, the Keene nonprofit is asking to retain money from a release agreement that was earmarked for the city.
Late last week, MEDC President Arthur Robert addressed the City Council’s Finance, Organization and Personnel Committee to request that MEDC be allowed to keep $10,000 the organization had agreed to pay the city, stemming from the 2013 construction of the Cheshire County Courthouse. The committee voted unanimously to recommend the full council approve the request, though one member expressed reservations about it.
During Thursday’s committee meeting, Robert told members that in late 2019 or early 2020, when the project was closing, some challenges arose, and the city and Cheshire County stepped up to contribute last-minute funding. According to City Manager Elizabeth Dragon, though the construction was completed several years ago, it was a New Markets Tax Credit project, and after seven years, it “goes through a closing process to unwind the tax credit deal and transfer ownership to the county.”
The challenges arose when Century Bank, which loaned MEDC $5 million toward the project, charged an unexpected yield maintenance fee, Dragon said in an email. A yield maintenance fee is a penalty issued by lenders to compensate for lost interest payments when a borrower pays off a loan ahead of its due date.
According to a payment summary that Dragon provided to The Sentinel, the city initially issued a $1.6 million loan in the form of a general obligation bond to help finance the courthouse project. The city and the county paid off the remainder of the bond in equal shares of $188,637.50, for a total of $377,275, in February.
“The original deal [seven years] before anticipated it being paid off during the unwinding of the tax credits,” Dragon wrote. “That was not going to be the case. Therefore, a payment agreement was reached with the county to split the remaining amount of the bond payments to facilitate the closing.”
In a Dec. 2 letter to Dragon, Robert explained that MEDC entered into a release and limited indemnification agreement (which Dragon said was executed Nov. 12) with Preti, Flaherty, Beliveau and Pachios, Chartered, LLP — a Portland, Maine-based law firm. The firm agreed to pay MEDC $25,000 in exchange for a release of all claims, demands and other actions related to the courthouse project. As part of that arrangement, MEDC agreed to pay $10,000 of the $25,000 to the city.
MEDC worked with the firm as it navigated the New Markets Tax Credits process, Robert told The Sentinel Tuesday.
“I regret having to take this ask before you this evening,” Robert told the council’s finance committee at last week’s meeting, as he made MEDC’s request for the city’s share of the release-agreement funds. “This ask reflects a financially challenging situation MEDC is up against today; you may have read about it in the papers recently. We intend these funds to be used to support a strategic planning process that will create a foundation, and ultimately a sustainable business plan, for MEDC to continue its important work.”
Since 1999, when it was rebranded from the Keene Economic Development and Revitalization Corp., MEDC has been responsible for a number of major development projects in southwestern New Hampshire, including the $40 million conversion of former railroad land in downtown Keene into a retail and housing area and the expansion of the Keene Public Library.
However, MEDC has not completed a project since 2018, according to Robert. He told The Sentinel in late November that the recent lull is not a reflection of the organization’s financial situation, instead pointing to the uncertain nature of the development business.
Robert, who took the helm in May, noted during Thursday’s committee meeting that, as part of the organization’s regrouping plans, he will be transitioning to a part-time position as president of MEDC.
In response to mounting debt, the nonprofit has also established an advisory board that it hopes will develop a plan to help MEDC get back on its feet.
Robert said the additional funds from the release agreement would be a big help as the organization figures out a way forward.
In addition to the $10,000 set aside for the city, $10,000 was earmarked for Cheshire County, and the remaining $5,000 was to be retained by MEDC.
MEDC has also asked the county, which formally took ownership of the courthouse in February, to retain its portion of the money. According to County Administrator Chris Coates, this request has been approved by county commissioners.
But while the City Council’s finance committee agreed unanimously to support MEDC’s request for the city’s portion, Councilor Terry Clark did not cast his vote lightly.
He said the city had to contribute a significant amount of money for the courthouse project due to the last-minute complications, and said he doesn’t feel the city is getting a fair shake given what it had put in.
“The taxpayers seem to be getting it right in the neck,” Clark said. He also suggested there be an oversight process to evaluate “how MEDC operates and try to get its house back in order.”
Ultimately, despite the situation leaving “a bad taste in my mouth,” Clark decided to support the request, stating that he wants MEDC to stay afloat. However, he suggested better communication in the future in an effort to make sure scenarios like this don’t arise again, noting that he would have liked to have known about MEDC’s financial problems before it was publicized in the media.
“I just don’t want to, a year from now, ... find out that it’s worse than we thought it was,” Clark said. “I’d like to have all of the information up front and to know exactly what it is that we’re dealing with. So that when things like this come, we don’t have to ask as many questions, so that we can make our decisions over a period of time rather than being told two days before on the agenda that this is coming up.”
With the committee’s recommendation, MEDC’s request will head to the City Council for further consideration. The council will next meet Thursday at 7 p.m.