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Council discusses taking on SID Center loan to capture full rent revenue
Summary
In a post-meeting workshop Keokuk staff outlined a proposal for the city to assume a loan tied to the Southeast Iowa Development Center, which would allow the city to collect 100% of rent revenue and could accelerate loan repayment but would leave the city with ongoing operating costs.
At a council workshop immediately following its regular meeting, staff reviewed the loan and operational finances for the Southeast Iowa Development Center (SID Center) and asked the council whether it wanted to pursue assuming the outstanding loan currently held by the Keokuk Economic Development Corporation (KEDC).
Staff reported the loan principal in the meeting as approximately $281,000 (the transcript contained additional unclear digits). Under the existing memorandum of understanding the city and KEDC each receive 50% of rent revenues; the staff proposal would have the city take the loan and collect 100% of rent going forward.
Staff said the SID Center currently brings in about $60,000 a year in rent while annual operating expenses the city budgets are roughly $150,000. With the city collecting both shares of rent, receipts would rise to about $120,000 a year; applying that additional revenue solely to the loan principal could, by staff's calculation, pay off the loan in about 28 months. Staff noted the current loan payment is about $3,200 a month and that the city would need to decide whether to make the minimum payment schedule (which primarily covers interest) or to accelerate principal payments.
Staff also flagged operational responsibilities that would shift if KEDC no longer manages the building: building maintenance, utilities, janitorial services and marketing of vacant spaces. The council discussed potential contributions from Lee County (which has expressed interest in placing staff in the SID Center) to help market the space and offset some management duties.
Council members asked for more detailed expense and tax estimates before deciding; staff said the item will appear on the Jan. 2 agenda for further action.
"Right now we currently take in $60,000 a year of the rent monies and we expend over $150,000 on the building," a city staff member said, summarizing the operating gap and explaining the financial rationale for considering loan assumption.
Staff said the city retains ownership under the current agreement for approximately 13 more years and that taking the loan could reduce the city's net carrying costs over time if additional tenants are secured, but it does not guarantee future tenancy or eliminate the annual operating shortfall.
The council directed staff to bring the item back on the Jan. 2 agenda with more detailed financial figures and options for repayment schedules.
