Debt burdens YMCA, Association seeks refinancing with county
Published 11:56 am Thursday, December 10, 2015
Prince Edward County supervisors took no action on a request from the Southside Virginia Family YMCA to co-sign a note to refinance the association’s $2.1 million of debt and to lower its existing loan interest rate of 6.95 percent.
The request came as Kipper Lafoon, a member of the Y’s board of directors, told the board of supervisors that the Y has struggled from “month-to-month” with bills, payroll and the existing debt load.
Supervisors voted 7-1 to table a proposed promissory note laying out the terms of the Y paying back one of three planned $50,000 loan installments.
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“We are frankly trying to regroup and restructure financially so that we might be able to pay our bills,” Lafoon told supervisors during their Tuesday meeting, “and sustain ourselves without coming back periodically for help from the board of supervisors and without hitting our community so hard in terms of donations.”
He said one way to curb expenses and “cure our ills right now is to refinance.”
He said the existing $2.1 million debt was “…quite a bit more than we had originally planned for … We’ve been struggling with that kind of a debt. We’re financed at right at 6.95 percent interest. And our monthly payments are in excess of $19,000 a month.”
He asked supervisors to consider “an endorsement. If at
some point in time you could consider endorsing a note along with the Y.”
“We have struggled a little bit with payroll at times and we have had to catch-up on a few bills at times. Right now, we’re doing fairly well. We’re still struggling from month-to-month,” Lafoon said, noting that the Y has not missed a loan payment.
He said lenders are willing to give the Y a “much better, more attractive interest rate if the county participates in the loan with their signature.”
Lafoon said he was quoted several different interest rates, “and I think we can beat everything that I’ve been quoted. But one was 4.99 percent [and] the other was 3.99 in the event that we were to be accredited as a tax-exempt loan.”
With the 3.99 percent interest rate, monthly payments would diminish to $12,714, and with the 4.99 percent rate, the payments would be $13,847, based on a 20-year repayment.
That would go a very long way in terms of making this a credible attempt at the Y sustaining themselves without having to come back to you so often for funds.”
Lafoon said the county had “quite a bit of investment in the Y at this point so far as a county,” calling the association a success.
“In this case, the only support we’re asking for is a signature … What we would like to do is reduce that payment considerably,” he said.
After supervisors took no action on the co-signing request and tabled the proposed promissory note — which stipulated the Y would pay the county’s industrial development authority the borrowed $50,000 by March 2019 — Lafoon told The Herald that he was “disappointed that the county is not more interested in being a partner with the Y than they have been.”
“If we have to do that without the county’s help we will do it without the county’s help,” he said. “The community has always supported the Y … I’m confident that this community will stand behind it because it’s probably one of the greatest assets that we have as a community.”
The proposed promissory note — which the board tabled until after the 2015 certified audit is available — is a result of supervisors agreeing “to provide a loan of $50,000 per year for three years [to the Y] with repayment to begin five years after the first payment … The second and third installments of the loan were contingent on a bi-annual review by the YMCA Committee to ascertain if the YMCA had made adequate progress in addressing their cash-flow challenges,” stated County Administrator Wade Bartlett’s staff report regarding the matter. “The first installment of the loan was paid on Feb. 21, 2014.”
Supervisors voted 4-4 in September on a failed motion to allocate the second $50,000 installment.
According to Bartlett, in Feb. 2014 the Y requested the county assist in restructuring of the association’s existing debt. Supervisors “were reluctant to agree,” and instead agreed to the three $50,000 loans.
Bartlett said that no formal method of repayment exists between the YMCA and the county’s IDA, which must receive the money because, “We’ve determined that the county could not loan the money directly to the Y,” he said.
Lockett District Supervisor Robert M. “Bobby” Jones suggested the board “kick around the idea of revisiting that possibility to help the Y out,” referencing the co-signing request.
Buffalo District Supervisor C.R. “Bob” Timmons Jr. said that co-signing a note would put the county responsible should the Y default on the loan. He said the county has allocated over $198,000 to the Y this year. “And with the $50,000, it would be $248,362 to the Y. This is what the county puts toward the Y each year.”
Jones compared helping the Y refinance to the library. “The library’s pretty much the same scenario.”
“It’s just too much money,” Timmons said. “I will not support that whatsoever.”
“To co-sign that note, we could end up making payments on it. And we have no collateral,” Farmville (701) District Supervisor Jim Wilck said.
Hampden District Charles W. McKay offered a motion that the county co-sign a note with the Y, but withdrew his motion.
“I think it’s something we need to talk about,” Leigh District Supervisor Jerry R. Townsend said. “We need to get ya’ll out of our pocket. We need to get ya’ll out of our pocket, and if that’s what we need to do, we need to sit around and dialogue a little bit … What you presented tonight, that’s not enough for me,” Townsend said.
He questioned the Y’s interest rate, what would be done with the savings should the interest rate improve and loan repayment history.
“We need to decide whether or not our attitude toward the Y is that we don’t want it to exist or do we want to look at [it] as a long-term investment to our community as a part of our recreation …,” Prospect District Supervisor Calvin L. Gray said. “We need to have that discussion.”
“They will sign the note that you prepared, I’m sure,” McKay said, “to pay the $50,000 back … It’s not going to default,” he said of the Y’s loan from the board.
McKay cast the lone vote against tabling the promissory note.
Jones suggested holding a special meeting with the Y, which wasn’t voted upon.