'Legal issues,' delinquent loans forcing county to re-think economic development program
John Mark Shaver/Fairmont News STAFF WRITER
A Marion County program designed to give new or existing businesses low-interest funds for expansion and additional jobs is changing because of what officials say are “legal issues” involving two local recipients.
According to County Administrator Kris Cinalli, out of more than 30 loans awarded by the Marion County Development Authority (MCDA), Spectrum Radio and Demus Specialty Foods Inc. have yet to repay the debt they’ve incurred.
Spectrum Radio Group, which owns Rock 94, Variety 101, News-Talk 1490 and Sports-Talk 920, was loaned $75,000 in 2013, according to a recent audit of the loan program.
Spectrum, located at 450 Leonard Ave., was set to pay back the loan in quarterly installments of $562 with 3 percent interest, but the company made only two or three payments before stopping them altogether about a year ago, Cinalli told The Fairmont News.
“They’ve basically made no progress in the payback because by the time you factor in interest, those couple of payments that they made really don’t amount to anything,” Cinalli said. “So basically, they owe the whole amount.”
Cinalli said Spectrum officials applied for the loan in July or August of 2013, with the first payment scheduled for September of that year.
“We were told that they wanted a ‘mix’ of funding from several different sources, which wasn’t uncommon, especially since we generally only provided secondary funding behind a bank pursuant to our loan program guidelines,” Cinalli said.
Spectrum Radio Group purchased Fantasia Broadcasting Inc.’s licenses in 2013 to take ownership of the stations. That purchase marked the newly formed Spectrum’s first and only acquisition to date.
“The $75,000 was basically closing the gap in financing,” Spectrum co-managing member Alan Michaels said. “I prefer to refer to it as part of the capital stack, including equity and borrowing. One source of borrowing is the (MCDA). We thought it was a good deal with the county.”
But, according to Michaels, the final result was more complicated, and the business didn’t grow as expected.
“Unfortunately, we’ve been operating this station for several years, and we’ve had difficulty meeting our financial obligations because (the business) hasn’t expanded like we thought it would,” Michaels said. “Some business deals work out, and some don’t. We tried really hard to make this one work. ...”
Cinalli and county attorney Chuck Shields said the county has refrained from taking legal action against Spectrum, and officials hope that a resolution can be reached civilly between the two parties.
“We try to get things taken care of before we actually start suing people,” Shields said. “That doesn’t mean we won’t. If we don’t get some satisfaction from (Spectrum), then we’ll take all of the necessary legal action that’s available to us.”
Although the county is contemplating taking legal action against Spectrum, Michaels said the company can’t pay back the loan.
“It’s a bad loan,” Michaels said. “They have certain rights and remedies, but from a realistic standpoint, if they try to sue us for the money, then there’s still no money left available. It would be a waste of time and legal fees.”
Michaels said Spectrum owes money to other lenders besides the MCDA, all of which are subordinate to a senior debt to the Small Business Administration. To pay off the senior debt, Michaels said Spectrum must sell the radio station but can’t do so until the MCDA releases its lien on the business.
“It’s my understanding that there was a meeting and that the commission voted, reluctantly, in favor of providing the release,” Michaels said. “I understand that (a) county commissioner has spoken with the county attorney not allowing the release to take place.”
However, Cinalli said that was not the case and that the County Commission isn’t planning on releasing the lien anytime soon.
“They do have a request in to release that, but at this time we have no plans to do so,” Cinalli said. “They had a motion to pass it contingent upon ... certain pieces. When that information came in, it didn’t meet that criteria.”
The guidelines for the loan program state that the MCDA can grant a loan up to $50,000, although the Marion County Commission can approve additional funding up to an aggregate of $100,000. At $75,000, Spectrum Radio’s loan was the largest listed.
Shields said the county started working with Spectrum sometime this year in hopes of avoiding legal action.