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Bemidji City Council OKs loan for connection between Sanford Center and proposed hotel

BEMIDJI – The Bemidji City Council on Monday approved a loan request to help pay for a connection between the proposed hotel and the Sanford Center.

The $400,000 loan for the group proposing to build the Country Inn and Suites will come from the revolving loan fund that’s administered by the city. In the past, it’s been used for other economic development projects like the Harmony Co-op.

Tiffany Fettig, a business loan consultant for the Headwaters Regional Finance Corp., said the city’s loan money will be designated for the construction of the connection between the buildings. That connection would be city-owned.

“The reason they requested the $400,000 is if you’re going to build a project and you need financing on it, you borrow money against what you’re building,” city manager John Chattin said. “Well, you can’t borrow against something that isn’t going to be yours.”

Chattin said Kraus-Anderson, the construction company for the project, originally projected the cost of the connection between the hotel and the conference center would be more than $397,000.

Under the terms of the deal, the loan would be paid back with interest in about eight years. The deal includes a 1.5 percent fixed interest rate and 1 percent origination fee.

The city’s loan contains several contingencies, including written commitments from the primary lender and other lenders that investor equity contributions be accounted for and that Kraus-Anderson guarantee the city’s loan through the construction phase.

“That means that in the event that either the construction stops or the borrower cannot make interest payments … Kraus-Anderson would have to step in and make good on the loan on behalf of the borrower,” Fettig said. She said Kraus-Anderson has been approached about the guarantee but hasn’t yet agreed.

Fettig said during the only term of the agreement that departs from the city’s policy on the revolving loan fund is the amount. As a guideline, the maximum loan in the south shore development area is $250,000.

“Yes, there’s definitely risk involved in this project  … but the benefit is something you need to weigh,” said Greater Bemidji Executive Director Dave Hengel said at the meeting, citing the tax revenues that will be generated from the hotel and potentially drawing other development to the area.

Tripp Snyder, a Twin Cities-area developer, purchased 2.17 acres of land from the city for $756,202 with plans to build the project. The hotel has been delayed, but it’s still possible that shovels could be in the ground this year. 

John Hageman

John Hageman covers North Dakota politics from the Forum News Service bureau in Bismarck. He attended the University of Minnesota in the Twin Cities, where he studied journalism and political science, and he previously worked at the Grand Forks Herald and Bemidji Pioneer.  

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