Jessica Cejnar Andrews / Today at 5:37 p.m.

Del Norte County plans to revive ‘defunct’ JPA that defaulted on USDA debt after revolving loan program failed

Although she agreed that Del Norte County shared the obligation to repay an unpaid loan from the United States Department of Agriculture, only Valerie Starkey expressed reservations about resurrecting the joint authority that had defaulted on this debt.

Colleagues on the Del Norte County Board of Supervisors argued Tuesday that the Tri-Agency Economic Development Authority has had some success as an economic engine despite its history of bad business loans.

But Starkey, which represents District 2, said it believes a request to contribute $70,000 to hire a manager and pay the balance of that outstanding loan is “just a another layer of money wasted by the government”.

“All three agencies have had 50 years to prove they are a valid agency and they have failed,” she said. “Instead of a budget request for $70,000 from the general fund, I would rather we hire a grants writer who could be used by the county and the city and maybe even the port and turn that $70,000 salary $ a year in potentially $70 million in grants. »

District 5 Supervisor Bob Berkowitz was absent Tuesday.

Comprised of representatives from Crescent City, the Crescent City Port District, and Del Norte County, the Tri-Agency Economic Development Authority was created to assist in the community’s economic recovery from the 1964 tsunami.

The three agencies have established two revolving loan programs in Del Norte County: one funded by the U.S. Department of Commerce and administered by the Del Norte Economic Development Corporation since 1976.

The three agencies created their second revolving loan program in 1997 using $400,000 borrowed from USDA Rural Development. Administering the program itself, the three-agency USDA loan bore 1% interest per annum for a 30-year term, according to Assistant County Attorney Joel Campbell-Blair.

The three agencies defaulted on the loan in 2011 and the USDA accelerated that debt in 2012, Campbell-Blair wrote in a report to supervisors Tuesday.

“At the time, the principal balance was $263,799.61 with unpaid interest of $4,603.84,” Campbell-Blair wrote. “Since Tri-Agency’s last settlement offer in October 2020, the unpaid interest had increased to $20,966.29.”

According to Campbell-Blair, the three organizations have not participated in the loan program administered by the DNEDC since its inception and have not been officially responsible for it since 2018.

Other economic development projects in which the three agencies have been instrumental include projects involving the sewer and the airport as well as the establishment of the Del Norte Visitors Bureau, according to Campbell-Blair.

According to District 3 Supervisor Chris Howard, the three agencies have also been involved in efforts to bring high-speed broadband to Del Norte County.

“The small rural (communities) of Humboldt, Modoc, Siskiyou and other places in California don’t have broadband. We do,” he said. “And it’s because of the efforts of this community to not only allow the bandwidth to happen, but also to provide the redundancy we needed when the backbone was secured on the Pacific Power lines to O’Brien.”

According to Campbell-Blair, the USDA tri-agency loan program was ultimately a failure. However, in the early years of the program, the business owners who took out the initial loans – with one exception – repaid them in 2006.

These companies include Net Help Enterprises, Plaza Imports and Lighthouse Books, according to Campbell-Blair.

None are currently in operation, Starkey pointed out.

The exception in this first round of USDA loans is the City Center Motel, which went into receivership in 2008, and still owed Tri-Agency about $54,000, according to the Campbell-Blair report.

The receiver registered a super-priority lien certificate and deed of trust against the property. After a judge seized the deed of trust, the property was sold in 2017. The loan from the three agencies was never repaid, according to the Campbell-Blair report.

The second round of tri-agency loans was less successful.
Bistro Gardens at Crescent City Harbor failed when the owner fell ill, according to Campbell-Blair. In an attempt to install a functioning restaurant in the building, the port, which owned the building, and the three agencies released the owner from debt.

Another restaurant financed by a loan from the three agencies, Ambrosia Grill, declared bankruptcy in 2010. The three agencies received the accessories, worth $25,000, and the remaining unsecured debt, of $42,000, was been acquitted.

A third restaurant, the Surfside Grill, failed. When the building that housed it was seized, the three organizations left with $34,100. In 2020, Tri-Agency settled with the restaurant’s former owner for $115,000. The original debt was $115,706, not including interest, according to the Campbell-Blair report.

The Tri-Agency has been floundering since it defaulted on its USDA loan in 2011, according to Campbell-Blair.

“Member agencies stopped making annual contributions and a lawsuit between Tri-Agency and its then-executive director starved the agency of funds and staff support,” he wrote.

In his report, Campbell-Blair noted that between the DNEDC and the Tri-Agency, the Tri-Agency should be the coordinator of county-wide economic development efforts, as it is a public agency. subject to the California Public Records Act and Ralph M. Brown. Law governing public meetings.

The DNEDC is a private entity that is currently the subject of a federal investigation in connection with its lending activities, Campbell-Blair wrote.

In his report, Campbell-Blair included a proposed budget for the three agencies. This budget included contributions of $70,000 from the county, $30,000 from the city, and $10,000 from the port.

Expenses included in Campbell-Blair’s proposed budget for the three agencies include $25,000 in professional services and $82,800 in annual USDA loan payments.

Howard and fellow oversight board members Gerry Hemmingsen and Darrin Short wanted all three agencies to become viable again, though they wanted the joint powers authority to stay clear of a revolving loan program.

However, Hemmingsen said he believes Crescent City and the Port should contribute more to the three agencies than the Campbell-Blair proposed budget provides. Using tourism as an example, Hemmingsen pointed out that because there are more hotels within the city limits, Crescent City receives more transient occupancy tax revenue than the county.

The Crescent City Port District also receives transient occupancy tax revenue and should increase its contribution to the three agencies, Hemmingsen said.

Hemmingsen also pointed out that if Tri-Agency owes the USDA $280,000, if the plan is to pay it off in five years, the county’s contribution toward loan repayment would be less than the proposed $70,000.

“We’re going to pay a lot less than that if we bring all the agencies together and spread that out over five years. It won’t be as big of a success,” Hemmingsen said, adding that he would like to see a breakdown of other costs, including loan repayment.

Howard pointed out that the decisions that led to Tri-Agency’s default on its USDA loan were not made by current representatives of its member agencies. He said he and others had spent “an inordinate amount of time” trying to correct past mistakes.

Del Norte County has also changed over the past 50 years, moving away from the resource-based economy it once was, Howard noted.

“Those revenue streams that we used to rely on, from these public lands, from these private timber industries, from this commercial fishing are pretty much gone and there’s very little of it coming back into our general fund,” he said. . “We need to find ways to reinvent ourselves, and I think this joint authority, the three agencies, will help drive those conversations.”

Short, who said he was frustrated as a Crescent councilor to sit on the Tri-Agency and learn from his colleagues that he was lending money to people who normally wouldn’t have qualified for a loan. But, he said he liked Campbell-Blair’s view that the three agencies are best suited as an economic engine.

“I believe we need an economic engine in this community, and that’s why I’m here again to try to make the three agencies a viable agency,” Short said. “To get us out of this defunct status. I don’t know of any other way to do it.

Starkey continued to be the sole voice of opposition to the resurrection of the three agencies. She said she’s spoken to community members who also think revitalizing the app is a bad idea.

“We can all agree to disagree, but I’m very committed to that,” she said. “And I don’t just speak in a vacuum.”

Docs:

• Tri-Agency Report

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