GEDC forgives $200,000 loan to city

Among the items that the Gonzales Economic Development Corporation (GEDC) had to decide at their regularly scheduled Monday meeting was a request by City of Gonzales officials to consider forgiving a portion of a loan that was given in 2011 to purchase the old Quality Chevrolet building to convert it to the Victoria College campus.

As explained by GEDC Chair Crissy O'Neal, the city approached GEDC five years ago for a $400,000 loan to purchase the property for the Victoria College Workforce Center, where 50 percent of the loan would be forgiven upon certain criteria met with the remaining half coming due in March 2017.

Upon the coming of the end of the note, Gonzales City Manager Allen Barnes addressed the board, looking to see if they would forgive the remainder of the loan. He touted the benefits that the college has provided to the city.

Pertaining to the $200,000 that the city was on the hook to repay, Barnes said that it would create a huge budgetary impact if they had to repay the amount considering the leaner times that they have been experiencing this year. Without a little help from the EDC, the city would likely have to forgo raises for city employees this year and would not be able to carry out certain capital improvements.

He concluded by saying that he thought that the city had merited forgiveness of the loan based on what the college has provided and the relationship between the three parties.

Board member James Ryan motioned to forgive the note with Nathan Neuse giving the second.

In discussion, board member Dennis Nesser wondered aloud if they would treat a corporation with the same benefit as they were about to extend the city. Board member Larry Wehde says that he wanted to support the college but would ultimately recuse himself from the final vote based on his relationship with the school board.

The motion to forgive the $200,000 loan was passed with Nesser and board member Hector Porras voting against.

As O'Neal explained later, GEDC would not be missing any additional funds from the loan forgiveness, for the money was not included in their rolls for the new budget year. Their budget is based off of sales tax revenue, and having the college in town was a benefit to them regardless.

“VC has done an excellent job,” she said. “Everything they have done in the community has put workforce back into the community. Every student that comes here at some point has to buy something: lunch, breakfast or gas in Gonzales. That all is sales tax revenue.”

The board then discussed five potential loan agreement revision submitted by Alcalde Hotel & Grill owner Rick Green. In order to keep the hotel afloat, the owner has come up with several ideas to move forward, but all need GEDC approval since they provided Green with their original loan and are the second lien holder on the note.

Among the changes to the agreement proposed were reducing the number of employees required per the loan agreement from 15 full-time employees to five. He also wanted to drop the name “hotel” from the agreement. And in keeping with an agreement that the board authorized in January, Green looked to make interest-only payments for the remainder of the year with the unpaid principal amount to be repaid at the end of the note.

The move to remake the Alcalde Hotel into a luxury living home for seniors and executives is what caused the board to have to do a bit of research.

GEDC President Genora Young addressed the board, stating that by what she had learned, they were not authorized by law to allow the business to change from a hotel to a residence block. The only way that would possibly work is if it were low-income rental properties, she said.

Young said that she had spoken to Green, who was not in attendance, and explained that it could not be structured that way. She said that he would look to turn the hotel into more of an extended stay business instead.

Board Member Tommy Cox said that if Green got what he wanted, that it would effectively default the current loan. Several times he expressed his displeasure with the whole arrangement, stating that he was tired of the deal and in his view, Green had already defaulted on the loan based on the employee statute.

Nesser was more blunt, saying that Green had not come through with previous agreements.

“He lied to us,” Nesser said. “He can be a hotel, or sell a hotel.”

Porras was quick to question if the board really wanted to own a hotel if they pushed Green on default status. O'Neal questioned if Green would even be able to pay the loan if the board did not act on his request.

Ryan motioned to extend the interest-only payment agreement for the remainder of the year but to deny the additional requests that Green had proposed. The motion passed 6-1 with Nesser as the lone dissenter.

When contacted later in the week, Green explained his intent for the proposals and his thoughts on his hotel.

"Like every other hotel in the Eagle Ford Shale, the Alcalde Hotel & Grill has been hurting from the economic downturn,” Green said. “We’re looking for new ways to generate revenue and serve the community of Gonzales. Because we’ve had very happy clients who stayed with us for extended periods, we are seeking to expand that focus and cater to executives traveling to Gonzales often or even locals who would like to stay in our luxury suites for weeks or months at a time.

“We are thankful for the city being willing to give us some grace through interest only payments for the rest of the year as we work hard to continue serving the community to the best of our ability."