JDA seeks financial support from city & county

Facing a potential financial dilemma, the Grady County Joint Development Authority (JDA) has propositioned city and county officials for possible financial aid to meet the authority’s credit obligations.
The recent closing of Lining Innovations, a Wisconsin based firm that was leasing the 112,000 square foot facility off Wight Road, that was originally constructed to house the operations of Quincy, Fla., based Higdon Furniture Company, has put the JDA in a financial jam.
The authority still owes approximately $1.5 million on the facility, but without a rent paying tenant in the building, faces the prospects of paying the monthly note payment that, according to JDA Executive Director Brian Marlowe, fluctuates with the prime interest rate, which over the last six months has moved the monthly payment between $12,000 to $14,000.
The Grady County Board of Commissioners took up the request Tuesday morning. Only Commissioner Elwyn Childs was absent from the discussion.
Chairman Bobby Burns outlined the current JDA situation to his fellow board members.
“This is the result of the bankruptcy of Higdon Furniture Company, as I understand it,” Burns told commissioners. Burns noted that the authority has a lien on property seized from Lining Innovations, but that proceeds from an upcoming sheriff’s sale would not be available until sometime in September.
The commission chairman also advised the other commissioners the authority has met with local banks to update them on the situation, and also with Higdon Furniture Company officials concerning their personal guaranty.
“The bankruptcy of Higdon and the closing of Lining Innovations has put the authority in a bind. The JDA has no liquid assets available to make the monthly payments and that is the reason for this request,” Chairman Burns said.
Burns raised the question of the personal guaranty made by the senior Mr. Higdon. “My understanding is the guaranty was on the lease and not a separate guarantee of the note,” Burns asked JDA Executive Director Marlowe, who attended Tuesday’s commission meeting.
“That is correct, but our legal counsel says the guaranty is still in full force and effect,” Marlowe said.
The JDA chief said the Higdons have committed to getting back with the authority not later than July 31 regarding the guaranty. Marlowe says the Higdons are seeking a legal opinion regarding the guaranty.
Burns stated the authority needs the city and county assistance to make the payments until the time an answer from the Higdons is received and the sale of the seized property can be conducted.
Commissioner Charles Renaud asked if the city had been approached, and County Administrator Rusty Moye said city officials are waiting for the county to act.
City Manager Chris Addleton, following the Tuesday morning vote, told The Messenger he had indicated the city’s commitment to assist, provided the county participates, but the issue has not been discussed by the full council.
Marlowe described the county’s assistance as an “investment” in a community asset.
He noted, “A lot of people are out kicking the tires. Companies are looking for deals and ways to cut costs. They are looking at communities that offer cost saving opportunities.”
Marlowe also shared with commissioners information regarding a meeting he had with a broker representing companies in Florida which are interested in facilities the size of the vacant manufacturing plant.
“This asset is important to this community. Eighty percent of prospects don’t come to a community unless they have a building to look at. Having this building here is both good and bad. It’s bad that it is vacant right now, but it is good we have it for people to come look at,” Marlowe said.
When the facility was constructed for Higdon Furniture Company, the authority served as a conduit to low financing to attract the company. The authority borrowed the money and, in turn, leased the facility to the Higdons under lease purchase agreement. In addition to a lease payment sufficient to cover the monthly note, Higdon Furniture also paid the authority in lieu of taxes an amount which was equal to what the property taxes on the facility would be.
Marlowe told commissioners the idea of seeking county aid is part of a “stop gap” measure, and the authority is only seeking funding until which time a new tenant can take possession of the facility or Higdon makes good on the guaranty.
Commissioner Renaud asked Marlowe for a time estimate, but Marlowe indicated that was not possible.
“It could be as much as a year, or maybe longer. With the economy like it is, no one can be certain,” Marlowe said.
Renaud also expressed concern if county participation would in some way jeopardize the Higdon guaranty.
Commissioner Al Ball also voiced his concern for the precedent the commission would be setting. “I wouldn’t want our assistance being misconstrued that the county is a place you can run to for money. However, I feel the job creation possibilities are important and we should work together on this,” Ball said.
Commissioner Charles Norton quizzed Marlowe on the proposal to consolidate the loan payments and $500,000 approved in a previous Special Purpose Local Option Sales Tax referendum for an industrial spec building.
Marlowe explained that the authority was seeking to make the monthly payments manageable, but had no plans to consolidate the two loans owed on the facility.
In fact, one of the loans is a zero percent interest loan the JDA obtained through a program through Grady Electric Membership Corporation. The larger loan, with a current balance of approximately $1.1 million, was obtained from the five local banks with United National serving as the lead bank.
Marlowe also explained that the SPLOST proceeds were invested in the facility most recently occupied by Park Model Manufacturing at Milestone Industrial Park.
According to Marlowe, the JDA owes approximately $387,000 on the former Park Model facility, but has recently executed a lease with a Florida firm that is shifting production to the Cairo plant.
“The building is not occupied yet, but the company began paying rent in May, and we hope to have a grand opening in the next two months. They will start out with 15 jobs, but if they move all of their production to this facility, we could end up with up to 50 or 60 jobs,” Marlowe reported.
The JDA executive also reported that approximately $500,000 is still owed on the purchase of the former Roddenbery plant, which is now known as the Heritage Industrial Complex.
“I fully understand the board’s questions and concerns. We are just looking for ideas. If the city and county are willing to participate, then we will go back to the local banks and work with them to restructure the loan,” Marlowe said.
Under the proposal offered Tuesday, the JDA is seeking a monthly payment of $3,700 from both the city and county.
This is in addition to the annual investment by the county of $41,090 to the JDA. The city is currently funding the JDA at $37,500 annually.
Even if the city and county decide to invest the additional money with the JDA, the local development authority would remain significantly underfunded when compared to other area authorities.
As part of the JDA request, information was provided to county officials that indicates the local investment in economic development is well below other communities.
According to information provided to the commission by Chairman Burns, investments in economic development activities in area counties are: Mitchell County – $273,219;  Decatur County – $256,000; Lee County – $180,500; Cook County – $160,000; Colquitt County – $150,000; Brooks County – $150,000; and Early County – $120,000.
After much discussion, Commissioner Ball called for the question and the board deadlocked 2-2 on the JDA financial assistance with Chairman Burns and Ball supporting the assistance and Commissioners Renaud and Norton voting against.
Norton commented after the vote he would support assistance for the authority on a month-to-month basis.
Chairman Burns said the commissioners would take the matter back up when Commissioner Elwyn Childs is present and additional information sought by Commissioner Renaud can be obtained.