(Neb.)- Chadron City Council Discusses Forgiven Business Loan
(Chadrad News)- The Chadron City Council this week debated the difference between a legal and a moral obligation before writing off a loan from the city's CDBG Reuse Pool made to a corporation that went defunct about 5 years ago.
The city approved 2 loans totaling $130,000 in 2004 and 2005 to MK Double R Enterprises for the Chadron True Value Home Center with the stores inventory and equipment serving as collateral. Payment on the loans stopped in 2014 after the store was sold and the company went out of business with no assets leaving $62,000 still unpaid.
Because the loan agreement did not hold the owners - Merlyn and Karleen Gramberg and Robert and Robin Baquet - personally responsible and the corporation has no assets, City Manager Greg Yanker recommended officially writing off the loan to clear it off the books. That didn't sit well with Council member Cheryl Welch.
"This is a moral issue and I think we need to bring that in to our policy discussions. I'm very uncomfortable with this because we are just going to tell these individuals, this enterprise that no longer exist, oh well, we're just out $62, 000. So these people, it just makes me angry and I don't think it's right.", Welch said.
Nebraska Northwest Development Corporation Director Deb Cottier told the council that the Grambergs didn't want to sell and were essentially legally strong-armed to do so by the holder of a new Ace Hardware franchise for Chadron.
Cottier said, "When ACE Hardware started looking at Chadron, they wanted that corner, they wanted the business, they offered them money for it and were essentially held hostage for it by the guy who came in and wanted to build it, and it's perfectly legal. He did absolutely nothing wrong, he just came in and said I'm warning you. You either sell me what you've got left on your property or i'll just put you out of business, that's what Karleen told me personally. So they did, and there was not enough money from the sale of the business or what was left to pay off the loans that were out there."
City Attorney Adam Edmund, who emphasized he did not have that position when the loans were issued, said he wasn't sure why the city didn't ask for personal guarantees or to add the building and land as collateral 14 and 15 years ago but that those are now standard practices for Chadron.
Yanker said that both the city's audit firm and the Neb Dept of Economic Development have been pushing to write off the debt and clear the books, adding that failing to do that or show that actions were being taken to force repayment could led to Chadron being declared ineligible for future Community Development Block Grants and similar funds. That also upset council member Welch.
Yanker said he had talked to the Grambergs and Baquets about the possibility of voluntary payments since they aren't legally required to pay anything, but that any future communication would have to go through their attorney. Council member Welch wasn't willing to give up on the idea.
"I am a person who believes in help and I hate to give up on anything. I would like to put out a personal request to the family that they please come speak to us at the city because we would greatly appreciate a $100, a $200 per month payment towards reducing this debt. I on principle am very uncomfortable with just writing off $62,000 in debt.", says Welch.
Deb Cottier didn't think it was a fair characterization of the Gramberg's attitude toward the situation.
"I don't want to make any blanket comments about whether or not someone tried to cheat the system or not, that really is immaterial at this point for this specific discussion. To say that they're getting away with it, believe me I would suspect they would have much rather not gotten away with any of that, it's been costly all the way around.", says Cottier
Councilman George Klein summed up the feelings of the other 3 members present, saying he didn't like writing off the loans but saw no alternative since the only responsibility for repayment is with a defunct corporation. Welch cast the lone dissenting vote.
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