Brainerd will loan $50,000 to a cooperative of mobile home residents who hope to purchase the mobile home park in which they live.
The Brainerd City Council on Monday with a 4-2 vote approved a recommendation from the city's Economic Development Authority to loan $50,000 from its housing revolving loan fund to Meadowview Cooperative to purchase Meadowview Manor mobile home park in southeast Brainerd.
The cooperative counts about 50 households as members in the 94-home park. The purchase cost of Meadowview Manor is about $2.7 million. The cooperative has financing from from a variety of lenders: about $2,134,000 million from ROC USA Capital, a niche lender for residential ownership projects; about $700,000 from Greater Minnesota Housing Fund; and $200,000 from other sources.
The Crow Wing County Housing and Redevelopment Authority has pledged $50,000 with a stipulation that lot rents increase 3 percent each year until the loan is repaid.
While the council's approval was for the cooperative to repay the loan at 3 percent interest over 15 years, City Administrator Dan Vogt said with the city in a third position among lenders it was a risky investment. He said the city should look at the $50,000 more as a grant to the cooperative.
"If something happens and it doesn't go I don't think we can expect to get our money back," Vogt said.
Voting against were council members Mary Koep and Bob Olson. Council President Kevin Goedker was absent.
Koep said the city shouldn't be involved in the project because of the third position it takes in case of default and the possibility of turnover at the park resulting in the cooperative unable to pay its debt.
"I think this is a foolish move and don't think it's in best inetrests of all the citizens of the city," Koep said. During the Personnel and Finance Committee meeting, Koep also read a letter from a resident opposed to the city loaning money for the project.
Olson said he was concerned for the Meadowview Manor residents. He said it was his belief that they wouldn't be able to make interest payments on the loans without raising lot rents. Olson said it appeared the Northcountry Cooperative Foundation, hired by the cooperative to help work toward the purchase, was getting a good deal.
"I'm very concerned for you renters," Olson said. "I don't think you're going to make it."
Sharon Magnan, president of Meadowview Cooperative, said the group has been working toward ownership of the park for two years.
"We're so close and just anxious to get it completed, finished, to give some stability to the future of the residents," Magnan said.
Council member Kelly Bevans said Meadowview Manor was one of the most beautiful mobile home parks around and though an aweful economic development project for the city it will be a tremendous benefit to almost 100 families in the city.
"Who is going to take better care of" the mobile home park than the residents who own it? Bevans said.
Bevans also noted the housing revolving loan fund was granted to the city years ago but never has been used. It was not tax dollars, he said.
"If we don't use it for this we should send (the money) back tonight," Bevans said. "There's not a line of people asking to use this."
Council member Lucy Nesheim said she'd also look at the $50,000 as a grant to the cooperative and maybe the city will be fortunate to see its investment returned.
"I believe it's risky but I also believe in the people out there and they'll make it go," Nesheim said.
Council member Anne Nelson Fisher also noted it was a risky loan but she was supportive of stablizing housing and reducing needs for housing assistence.
MATT ERICKSON may be reached at email@example.com or 855-5857.
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