Explaining the Loan that Might Help Save the Mateel Community Center
In Tuesday’s report on the Mateel Community Center Board of Directors meeting, the Mateel Board of Directors said they were applying for a loan with the RREDC (Redwood Regional Economic Development Commission.)
The Board reported to the membership their efforts and intention to explore this loan to the point of going through the underwriting process to determine their eligibility, but the terms they provided to the questions of what payments and terms might be, were given for purposes of transparency with the membership. However, the application isn’t yet filed, and the terms are not in writing.
In phone interviews, Gregg Foster of RREDC and Partick Cleary of the Humboldt Area Foundation provided more information about the loan process and their organizations’ relationship to each other and the Mateel. Mateel Board President Megan Gomes also gave more direct information about the loan and also about the Board’s effort to keep the hall.
Gregg Foster is the Executive Director of RREDC, Redwood Region Economic Development Commission, and, as he said, “proud south fork alumni.”
Foster said RREDC has met with board members from the Mateel Community Center, and the Board is compiling an application for RREDC to underwrite.
Foster explained that RREDC provides loans primarily to businesses but also to non-profits on occasion. RREDC’s first step is to meet with the applicant and learn their needs and their situation. Examples he gave included “whether they are trying to save jobs, whether it’s an expansion, whether they are trying to buy a new business, or in this case it would be refinancing some existing debt…”
Foster expanded on how the Mateel might benefit from the RREDC loan. Foster said it will allow them
to take care of the current accounts payable and the unpaid vendors, and other issues and to do so in such a way that will provide a stable cash flow for the organization. And that is what a debt can do is ‘clean up your balance sheet by taking care of the vendors and everybody else and then you know how much you owe every month.’ Then you have some certainty about the cash flow each month as opposed to ‘we’re going to try to pay you a little this month and some [next] month, [but then] one of the vendors may be demanding all of it’
Foster went on to say the next step is for the Mateel to submit their loan application. Foster explained that RREDC
underwrites their loans because we do not have an infinite amount of money. We have a very fixed pot of funds…. Specifically, if there’s not a margin, we don’t have a mission. We are here to help the community, but we have to get our loans paid back, so we have to do that [underwriting] level of study.
Foster explained that an important component of the loan application is the need for the applicant to illustrate how the project or organization benefits the community economically.
Also, to be eligible for the loan, Foster said,
[RREDC is] going to need the Mateel to do a really good job on it’s business plan and its projections. To stabilize that portion of the cash flow for the organization going forward so there aren’t any surprises.
Next Foster said RREDC’s next step if underwriting is successful, looks at whether RREDC and the applicant need a partner in the finance package. And he said RREDC has previously partnered loans with the Headwaters Fund, the Arcata Economic Development Corporation as well as Humboldt Area Foundation.
Mateel Community Center’s Board President Meghan Gomes explained her optomism about the possibility of the RREDC loan,
I was very excited talking to Gregg [Foster] even though it was a preliminary [conversaton.] It was kind of like the conversation we had with Patrick [Cleary], but it was more directional, which way to go. And I thought ‘oh my god, we could see our heads above the water if this works out.’
Megan explained that she, Board Member Stephen Helliwell, who has work experience as a Financial Counselor, Board Treasurer Eryn Snodgrass, and Mateel’s bookkeeper Amie McClellan comprise the subgroup working on the loan application. She acknowledges the three main tasks right now are finalizing the ‘actuals’ from July and August, finishing the ‘two year projections’ of income and expenses and completing their business plan.
Megan said that the effort on the part of the Board is preliminary, but they want to be sure the membership knows the Board is applying for the loan and why.
In the meantime, she also put the Board’s thinking about the actual potential of selling the hall to pay off debts into perspective:
I think that the sale of the building is exactly the way Garth brings it up. It’s the ultimate, last resort, worst case scenario if every other option were to fall apart, and the Board itself no longer [has] the drive to hold it together and the [wherewithal] to do it then I could see that as a possibility.
But I know for a fact that this board will do anything to not see that happen.
Board President Gomes doesn’t anticipate a plan for the building’s sale to be on the agenda at the Membership Meeting in November. She said if it becomes necessary to contemplate during the following year, the Board will call another meeting with a minimum of two weeks’ notice.
However, consideration of the loan by the membership will be on the agenda of this year’s annual membership meeting in November. Megan said the board is moving quickly to have as much of the underwriting process well underway in order to provide the best possible information to the Membership at the annual meeting.
Humboldt Area Foundation
Patrick Cleary, Executive Director, at the Humboldt Area Foundation said “its possible that Humboldt Area Foundation would be a lender alongside RREDC.”
Cleary said RREDC underwrites, or makes the assessment on the loan application, “because they are in the business of making loans, that is not our primary business.”
To explain how finance partnership works generally, Cleary said, “Let’s say it’s a half a million dollar loan, RREDC might make $250,000 of it, we might make $250,000 of it. RREDC would be the lead agency so they would do all the paperwork.”
Cleary articulated the importance of the underwriting process.
RREDC, I believe, needs updated financial statements that clearly spells out all the loans that need to be refinanced. And a business plan that clearly spells out that the loan payments would be within the ability of the Mateel to comfortably pay it back because no one wants this loan to go bad.”
Cleary gave his impressions of the Mateel’s organizational opportunities, “
I think the Mateel at this point is, [speaking as] an observer and someone who cares deeply about the Mateel, about to evolve as an organization, whereas a lot of the financial fortunes [in the past] really revolved around the success of Reggae. …At this point there is an opportunity for the Mateel, through their partnership with High Times, through their ability to rent out the facility, through the Summer Arts Festival, which is a more predictable income stream, to get on a more steady financial footing, and not have the ups and downs of one event. The ups and downs of one event creates an element of risk.
With regard to the organizaton’s challenges, Cleary said
It’s clear that there’s a large mountain of debt to overcome. That will take a concerted effort on the board to make sure that the business plan is solid and that the debt is financed in a way that can be handled over a reasonable period of time. And that the Board sort of rethink its role that its primary service is to serve the community as a community center rather than to be the concert promoter of a rather large Reggae festival.
To clear up a misconception, the report that the Humboldt Area Foundation would receive the Mateel property in the case of forfeiture is not what it seemed to this reporter.
When asked, Cleary described what would happen if the Mateel had difficulty making payments in the future, “Anytime a borrower is unable to make payments, the first thing you try to do is change the payment schedule to make it more realistic. But if that is unsuccessful, ultimately in the worst case scenario RREDC would initiate a forclosure procedure in which the building would be put up for sale.” The Humboldt Area Foundation would not become the owner of that property.