Details of Emporia’s Community Development Block Grant Revolving Loan Fund were the topic of discussion at this morning’s meeting of the Regional Development Association of East Central Kansas.
Assistant City Manager Mark McAnarney presented information he compiled comparing Emporia’s revolving loan fund to similar cities in Kansas.
The discussion centered around certain details of the loan program, including whether Emporia should set a minimum interest rate on the loans. The city currently establishes an interest rate based on the prime rate minus 1.5 percent, but the city commission recently had questions that arose while approving a loan for Glendo to purchase new equipment. The prime interest rate at the time had dropped to around 3 percent, and commissioners were concerned about setting such a low rate.
“One and a half percent isn’t much of a return for the risk,” RDA chairman Jeff Longbine said, explaining that the city commission is looking for the RDA’s recommendation on the issue.
RDA members also discussed whether loans could be refinanced when interest rates change. It was generally agreed that loans can be refinanced only in a restructuring effort to save a company.
There also were questions about whether a limit should be set either on the amount financed or the number of loans one company could receive. The concern is that one company defaulting on a large loan or on a number of loans could jeopardize the fund.
The issue was referred to the RDA’s finance committee to review the details and the language of the policy, which will then be presented to the city commission for discussion.