Catching up on our enormous mailbag backlog we found an email from a reader who commented on post about the Candlelight Pavilion's loan arrangement with the City of Claremont.
The reader offered up a possible win-win solution to help guarantee the city's loan - one that doesn't require an orchestral swell and breaking into song:
DATE: Monday, March 16, 2009 12:57 PM
SUBJECT: Candlelight Pavillion Theater City Loan
TO: Claremont Buzz
Dear Buzz,
The city has two options regarding the loan it has given to the Candlelight Pavillion Theater: one, it can forgive the loan completely or two, it can ask the Theater to repay the loan in full immediately.
In 2000 when the city approved the loan and a grant ($160,000 loan and $15,000 grant) there was a feeling that the Theater was a valued asset to the community, hence deserving of public support. The city approved the loan with a clear understanding of the risk, as stated in the staff report: "The nature of the loan and the current state of the property ownership and theater lease represent a repayment risk because of possible third-party actions."
The approved loan agreement stated that "If the theater closes due to the action of third parties the second ($80,000 ten-year repayment) component is forgiven."
Later the first $80,000 five year repayment plan, which was due in 2006, was amended (at the Theater's request) to amortize $55,000 over ten years after the Theater had paid $25,000. So the city could just forgive the loan voluntarily, or third party conditions at the site might lead the Theater to request forgiveness under the approved loan agreement.
Or, the city could initiate its own amendment to the loan agreement and ask the Theater to repay the full loan amount immediately. How will the Theater raise the money for the balloon payment? By obtaining a new private loan through the Small Business Administration (SBA). The city loan was granted at 6% and 10% interest rates. It is conceivable that under the Obama Administration's plan (announced on March 16, 2009) to help small businesses, the Theater could obtain a loan with more favorable conditions than the city's loan.
Under the plan, the Small Business Administration will increase loan guarantees to 90% from the current 85% on a loan up to $150,000 or 75% for a loan more than $150,000. The 90% SBA loan guarantee reduces lender risk, and the administration will temporarily eliminate upfront fees up to 3.75% or as much as $75,000 that are paid by borrowers.
This plan looks attractive. If the Theater takes advantage of the SBA plan, it can obtain a cheaper loan and be able to pay off the city loan. The Theater can offer a private bank the "20 theater production sets" as security. The city will in turn get its money back sooner to put in the budget at a time of pressing need.
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We also received this note from a reader who saw our post about the job fair Congressman David Dreier is hosting April 8th. The reader wanted to offer an additional job resource:
DATE: Wednesday, March 18, 2009 3:28 PM
SUBJECT: Job News
TO: Claremont Buzz
One resource you forget to mention is the highly successful"community-based" project of Pitzer College professor Jose Calderon and his students, The Pomona Economic Opportunity Center. I'm sure our neighbors would be glad to assist any Claremont residents who wish to sign up at The Pomona Day Labor Center. This facility was started with $50,000 of Pomona citizens' tax money and currently Pomona "provides just over half the $330,000 budget" plus many other services. I also suspect that since Norma Torres is such a strong supporter of this type of solution to our economic problems, that her influence on President Obama may bring many more benefits to the patrons of the Day Labor Center.
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