USDA loan hang-up: Blessing in disguise?
Another of Canton’s highly anticipated capital improvements on the horizon is a new municipal pool to replace the leaky aging one that has served residents for more than 70 years.
The complex 10-part financing package town leaders created to pay for the $2.2 million pool includes private donations, municipal funding, a $350,000 grant from the N.C. Parks and Recreation Trust Fund and a $1 million loan from the U.S. Department of Agriculture.
But that loan, which was supposed to be one of the more easily attainable components of the financing package, is now in jeopardy because of Congress’s decision to defer funding to the USDA’s rural development program that administers such loans.
Although that funding may reappear in the future, for now it’s not an option, and it may not be an option in the future, either, if the town is to open the new pool in time for next summer’s busy season.
Early reports on the loan situation revealed a “chicken little” syndrome, with some predicting the demise of the project altogether, but Canton Assistant Town Manager Jason Burrell doesn’t share in the pessimism; in fact, this may be the best thing that’s happened to Canton in some time.
“I think in terms of the USDA loan not being an option at this point to keep along with the time frame the board is trying to get the pool completed — I don’t think it’s that big of a deal,” Burrell said. “The financing will come.”
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Canton’s best option is to seek financing through commercial lenders, who offer a term significantly shorter than the USDA’s 40-year length. Of course, the shorter term from a commercial lender would come with a slightly higher interest rate, but could result in a cost savings anyway.
“Probably it’s theoretically better to do a 25-year loan, as opposed to 40. The interest rate isn’t that different — I think there is some savings doing a conventional financing loan,” he said.
And it may just be easier to accomplish; working with local commercial lenders is easier than dealing with an expansive federal agency.
“The USDA is a good resource, and a good option for funding, but the process is so slow,” he said. “Not so much the application process, but just the federal government part of it is so slow.”
Burrell went on to recount a situation that illustrates why waiting on the USDA is a bad idea.
“A couple of years back, we were looking at putting in a new fire truck. We were trying to get a USDA loan for that and we had to — something with EPA was changing on newer trucks, so we had to move relatively quickly to get this truck or it was going to be like $40,000 more for some emissions thing,” he said.
The USDA holds its cards close to its vest with regard to who gets funding and who doesn’t — either you’re in, or you’re in limbo, Burrell said.
“That’s where we were with that fire truck. We had to make a decision. So we had to pull the trigger, and I think we did that through BB&T, the financing,” he said. “The truck was ordered, we got the truck, and it had been on the road for like three months and then the USDA came back and said, ‘Hey, your loan’s approved!’”
