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News
Split county board approves hotel loan : News : Oswego Ledger-Sentinel : Hometown Newspaper for Oswego and Montgomery, IllinoisSplit county board approves hotel loan
| Members disagrees on Timber Creek Inn's viability in granting $750,000 loan
| by Matt Schury
| 11/13/2008
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Long time Sandwich developer Ralph Webb, president of WOW Enterprises, recently turned to the Kendall County Board for a loan to help one of his projects through the economic downturn.
The board approved a $750,000 loan for the Best Western Timber Creek Inn and Suites Hotel on the far western side of Kendall County in Sandwich as well as a commercial subdivision and indoor water park set to open this spring east of the hotel on Route 34.
Webb and his family own the hotel and the 13-acre Avery subdivision to the east. Webb, along with his wife, owns the commercial subdivision and Webb's daughter and son-in-law, Karen and Charles Bohnstedt, own the hotel.
"Had we not had this financial meltdown across the country, this would not be something that we would have been looking for," Webb said. "If the banks were still lending money, we would have more than enough collateral."
Webb said, like most builders, he also saw a rise in the cost of building materials.
"We did have some overruns in the construction," he said. "There are some items that increased 1,000 percent."
For example he said that the price of copper wire has risen from $30 to $300 a roll since they began construction on the
County Administrator Jeff Wilkins said that the loan, from the Economic Development Revolving Loan Fund, would help the business get through the downturn in the economy. The county established its Revolving Loan Fund in the 1980s with the proceeds from a state economic development grant.
"It's a very important project to that community," Wilkins said. "Basically, they got caught in the credit freeze situation."
Wilkins added that he sees it as a short-term loan.
"Right now we're just filling a gap-not only in financing but in time," Wilkins said.
Board member John Purcell, who heads the county's finance committee, stressed that the loan was coming from earmarked funds and not from the county's general fund.
"The fund is used to help other businesses or we could actually loan it to municipalities," Purcell said.
Purcell noted that that once the funds are paid back they go back into the Revolving Loan Fund account.
One of the requirements for the loan is that it creates jobs. Wilkins noted that the loan would help retain 76 jobs in the county.
At the Nov. 5 meeting the board voted 8-2 to approve the loan with Purcell and Pam Parr casting the negative votes.
Purcell, a local business owner, says that he understands the situation Webb is in but has "philosophical reasons" for not supporting the loan.
"I struggle with the government loaning money to businesses-whether it's this business or any other business. That's how I vote on all of these (loans)," Purcell said. "I prefer that government stays out of the business of making loans as much as possible."
He added that he would listen careful if it was to loan money to a municipality.
"I understand the credit crunch, it's a real factor in today's economy," Purcell said. "I feel their pain, I know it's tough right now and things are really tightening up."
Board member Anne Vickery said that the loan was a smart investment.
"I feel very positive about this loan," she said.
Vickery added Webb and his family were very open with their finances and they signed a personal note of guarantee, adding that she and other members of the board met with the owners of the property multiple times.
"We asked a lot of difficult questions about their business," Vickery said. "There is another entity next door, an indoor water park that is going to be huge and highly successful."
Vickery said a feasibility study was also done about what went into the water park and how that would add to the revenue and occupancy rate of the hotel.
Wilkins said the county would have a collateral position of about $6.3 million on the $750,000 loan. The county would be in the second mortgage on seven of the lots in the Avery Subdivision and in the third mortgage position on the hotel.
"As they sell those lots, they will be paying off the first position bank and then once that position is paid off they will start to pay us," Wilkins said.
Wilkins explained the loan structure would involve two-year 4.5 percent interest only payments. If the county were not paid fully, the principal and interest payments would be amortized at 15 years at 4.5 percent. If the loan is not paid in seven years, Wilkins said the county could consider adjusting interest rates to future market conditions.
Parr cites 'abysmal'
occupancy rates at hotel
Parr explained that she voted against giving Webb the loan because she felt the occupancy rates, the rate of guests on average staying at the hotel were too low.
Parr said that the highest occupancy rate that she had heard for the hotel since it opened was 44 percent.
"That's abysmal. Now a great hotel is in the 90 (percent), a pretty average hotel is 60 (percent)," Parr said.
At the county board meeting Wilkins said the occupancy rates were growing and were strong for the season.
"Some of the occupancy rates that they are experiencing are extremely strong," Wilkins said.
Wilkins said this is especially a good sign because November is a slower month for the hotel.
The economy was also a concern for Parr.
"They're off the beaten path ... in this economy I'm not sure they're going to have the resources to repay a loan," Parr said.
She added that she didn't like that the county was in the second and third position on the mortgage.
"That means if they were to default on anybody's loan the other people get first dibs on the money that is left," Parr said. "On the sale of the lots we are in second and on the business itself we are on third."
Parr continued, "It just didn't sound like a viable situation. I thought it was too risky."
Parr said that the money was specifically earmarked for businesses that meet general criteria through banks for loans.
"Even though it is not General Funds money it's still taxpayer money from the state," Parr said.
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