Dresden Board changes loan agreement for municipal complex project

By Shannon Taylor

shannon@magicvalleypublishing.com

Two resolutions passed at Dresden’s special-called meeting last week concerned the Municipal Complex funding where the City had to switch from the previous USDA loan to a loan with the Tennessee Municipal Bond Fund (TMBF) through the Public Building Authority in Clarksville. 

In April of this year a resolution was passed approving a $6.9 million loan agreement with the USDA. 

“We had a great interest rate. We were happy. We thought we had everything in line to go,” Dresden Mayor Mark Maddox emphasized. 

After receiving the environmental study back from the state and sending the USDA a PDA (preliminary-architectural report), when the city prepared to call local banks to fund the construction loans and notify the USDA, Maddox said they were “not in line.”

Maddox said that there would be more “hoops we’d have to jump through” and cause a two-month to one-year delay in the construction of the municipal complex. 

“We feel like we were not informed properly,” Maddox said and they began the process of pursuing other funding.

The loan is for $6 million instead of the previous $6.9-million loan through the USDA. “We found some cash and intend to use it to get us to that six million (dollars),” Maddox explained. Although the interest rate was fixed with the USDA at approximately 3.75 percent, the new loan would incur an interest of 5.85 percent. 

“It’s two percent higher,” Maddox said. “The plan is for the city to lock the loan in for five years and gamble that interest rates will be lower in five years and then we have the ability to refinance,” Maddox said. 

“The TMBF is a sanctioned agency through the Comptroller’s Office. They have the blessing of the Comptroller’s Office and every loan they do is for municipal governments and deal strictly with city governments,” Branscum explained. 

Alderman Ralph Cobb asked if the city received money from FEMA or any other place/person would that be taken off the loan so it’s paid off quicker. 

“Whatever cash we have either out of this year’s budget or FEMA money that comes in or insurance proceeds will be used to lower our obligation on this loan,” Maddox stressed.

One of the differences between the TMBF and USDA loan was the time period of the loans. The USDA loan was a 40-year loan and the TMBF is only 25. Another difference is that with the USDA loan the city could pull from it when they needed it, but the TMBF loan has the proceeds distributed to the city as soon as it goes through. 

“It is our intention to invest that money that we do not need immediately in hopes that we can offset a little bit of that interest rate,” Maddox explained.

The TMBF total interest over the life of the loan will accumulate to $5,567,620.50, according to Finance Director Carla Edwards, at the 5.85 percent interest rate, which would make set the total amount to be paid back at $11,567,620.50 — if the interest rate doesn’t fluctuate.

Maddox agreed with Alderman Dale Hutcherson that moving from the USDA loan to the TMBF minimized risks in the long term for the city, with zero delays on the construction.

Resolution 2024-05, which authorized the incurrence of a loan for $6 million, and Resolution 2024-06, which authorized the execution of the loan, were both passed unanimously by the Dresden City Board. 

Unless within 20 days from the date of publication, a petition signed by at least 10 percent of registered voters of the city of Dresden protesting the incurrence of indebtedness by the execution of the loan agreement, the agreement will be executed as proposed. 

The Dresden Board will meet in regular session on Nov. 6 at 6 p.m. The Dresden Condemnation Board will meet on Oct. 16 at 5:30 p.m.