City of McAlester's economic development committee members are continuing to discuss a process for the city to put up taxpayer dollars as collateral for private businesses.
That was the main topic of discussion as the Local Economic Advancement and Development Committee members met Tuesday in the Second Floor Conference room at City Hall.
City Economic and Development Director Kirk Ridenour presented committee members with a draft plan for the process, which has not yet been approved. Ridenour also provided LEAD Committee members with updates on several city projects.
Discussing details of what might go into a contract for the city to use taxpayer dollars as collateral for private business projects might seem premature, since no agreement or project is in place — but city councilors recently requested more information about what such an agreement might entail.
During the Sept. 10 meeting of the McAlester City Council, city councilors were asked by The Bank N.A. to place a $24,000 certificate of deposit in city funds in an account at the bank to secure a $30,000 loan sought by Lovera's Handcrafted Foods in Krebs, related to a planned expansion related to Lovera's cheese-making business.
City councilors did not reject the proposal outright, but asked for more details about what such an agreement might entail.
Following the LEAD Committee's Tuesday meeting, Ridenour said he plans to begin work based on a draft of something with which local bankers should be familiar.
"It's an assignment of model account," Ridenour said, referring to a standard banking loan form. "We're going to model our agreement on that." Plans are for that to be used as a standard form in any applications for the city to help secure private business loans.
Ridenour planned to have a draft ready in time for the LEAD Committee's next regular meeting, tentatively set for noon on the second Tuesday in November in the Second Floor Conference Room at City Hall.
Discussion during this week's meeting included talk about the concept of a collateral loan support program.
"It's a good idea," said LEAD Committee member Chad Donoley of AOK Railroad. Speaking of the importance of details, Donoley said he's seen proposed agreements in other areas tasking for a high rate of collateral.
"They wanted six or seven to one for collateral," he said.
Ridenour noted that public support is needed.
"That the public approve of this is important," he said. "If the public doesn't think this is a viable way to do economic development, we will find another way."
LEAD Committee member Jay Akard of BancFirst said that putting up city tax dollars for collateral entails a risk.
"There's always risk — a calculated risk," he said. If a business has a strong cash flow, there might be a way to approve a loan or help in another way, he said.
"Build a building," suggested Akard. "I've seen that work."
Jim "Red" Mills, the former director of the McAlester Economic Development Service, spoke in support of the concept, suggesting the city construct a shell building. He noted that bringing a new industry or business to the city can be an intense process.
"It makes old people out of young people and it makes short people out of tall people," he said. Mills suggested inviting more people to attend LEAD meetings, such as representatives from the Department of Commerce.
McAlester Mayor John Browne said the city would need specific information from businesses requesting the city's assistance.
"I think we need to know the cash flow versus the debt service, the total debt," he said.
Members also discussed the types of deals with which the city might not be involved.
"I'm not advocating for us to do deals that aren't good deals to do," Ridenour said.
LEAD Committee member Dana Hugle noted the source of requests so far.
"It's not the business owners coming to the city," Hugle said. "It's the banks."
Ridenour said that's the way he likes it.
"I don't want any businesses coming to the city," he said, adding that he would want requests for the city's help with loans to be vetted first by the banks.
Other discussion centered on the need to diversify in the city's economic development projects.
In giving an update of recent city activities, Ridenour related that the Downtown Streetscapes project is nearly complete, that discussions are still ongoing regarding a proposed Tax Increment Financing, or TIF, plan for Downtown McAlester, and that the Shops in McAlester project still appears to be moving forward.
He also talked about the recent McAlester Stampede effort made in Washington and how the direct hire procedure has streamlined the application process for those applying to work at the McAlester Army Ammunition Plant.
Other LEAD Committee members attending the meeting included Brian Foris, of the McAlester Army Ammunition Plant, who spoke of how the direct hire procedure has affected McAAP; Kyle Spruce, representing the McAlester Chamber of Commerce; Micky Lloyd, of Common Roots; and Ben Capers, of Steak 'n Shake.
Afterward, Browne said he thought the meeting went well.
"I think it was a good meeting," Browne said. "They provided leadership to move the city forward on economic development. Discussing a collateral agreement was very professional and should help Kirk come up with a criteria to adopt a plan."
Contact James Beaty at firstname.lastname@example.org.