Last month, the town of Canton’s highly anticipated municipal pool project hit an unexpected snag when it was learned that a 40-year United States Department of Agriculture loan would not be available as part of the complex, 10-part financing package town leaders created to pay for the project.
But Canton’s pool is not the only local project now facing difficulties due to the evaporation of what should have been an easily attainable loan.
Social services agency Mountain Projects currently occupies a leaky, cramped, 100-year old facility on Old Balsam Road that it has been in since the mid-1970s; on June 13 it made an offer on the old Haywood County Health Department building on Asheville Road, which Haywood County Commissioners accepted.
Mountain Projects was eyeing a closing date in early November, but on Sept. 12 Executive Director Patsy Davis received a letter from USDA Area Director Pam Hysong informing her that the loan would, like Canton’s, not be available.
“I think we both got the same kind of letter,” Davis said.
That letter states that as of Sept. 1, there was more than $503 million remaining in a USDA Community Facilities loan allocation for 2016, but that money would instead be used to fund a new program called “Uplift America.”
Uplift America allows the USDA to make loans to re-lenders called Community Development Financial Institutions, who in turn loan funds to applicants.
CDFIs are private financial institutions that can now borrow from the USDA’s pool of funds with an interest rate currently capped at 2.75 percent. However, there is no rate cap on what these re-lenders can charge loan recipients.
Hysong’s letter went on to say that USDA Rural Development field staff was “blind-sided” by the news, much like leaders in Canton and at Mountain Projects, who are now scrambling to maintain project deadlines and line up funding for these commitments.
Seth Hendler-Voss, Canton’s town manager, said that he’s been soliciting quotes from commercial lenders to fill the $1 million hole in the $2.2 million pool project.
“We’ve had to back up and punt, but we’re still in the game,” Hendler-Voss said, adding that with a good project bid, some extra fundraising and good interest rates, Canton’s town administration and board were hopeful the project would be finished in time for next summer’s swimming season.
“We’re maintaining a positive attitude,” he said.
An unexpected silver lining may yet reveal itself for Canton; although a commercial loan would carry a higher interest rate than a USDA loan, commercial terms are typically 20 or 30 years, compared to the USDA’s 40-year term.
Although a 20-year loan would require higher monthly and yearly payments, in the long run the loan would be paid off earlier, resulting in a substantial savings on interest.
Mountain Projects has no such luxury. Currently, there is no mortgage payment on the Old Balsam Road facility, so taking on a large payment for a 20-year commercial loan puts Davis in what she said was an “uncomfortable” position.
“We are proceeding with caution,” she said.
Mountain Projects offered Haywood County $325,000 for the Asheville Road building, but estimates around $800,000 in rehabilitation costs to bring it up to code. Commissioners accepted Davis’ request for an extension on the closing date to March 1, giving her time to reapply to the USDA — if funding is even allocated — or to line up commercial financing and augment current fundraising.
Haywood County’s new $3.75 million animal shelter also utilizes USDA funding as part of its financing package, but according to County Manager Ira Dove, the county’s loan application was well underway before USDA funding was reallocated.