Calais ends city loan program designed to develop business

After more than two decades, the City of Calais is ending its Economic Development Loan Fund, a program that oversaw the distribution and management of more than $2.8 million across 85 loans for Calais businesses.
Since it began in the 1990s, the fund enabled area businesses to "expand, purchase inventory, construct or renovate their store, hire employees and update equipment," says Calais Finance Director Crystal Gallina. Part of the original intention behind the fund was to generate economic activity in the area by investing in businesses with clear plans of expanding or enhancing their service -- particularly if their expansion led to job creation.
While started with good intentions, the fund has a mixed record when it comes to gains and losses. Loans of any kind come with risks, and the area has its economic challenges that can lead to missed payments.
A press release from November of 2007 indicates that $160,000 was written off by the city at the advice of auditors, according to Gallina, indicating that potentially multiple loans had failed since being offered during the fund's early years.
Many of the loans were paid back, however. Among the success stories was $125,000 borrowed by WQDY in 1996. It enabled the radio station to purchase equipment and expand its presence in communities across Washington and Charlotte counties. That loan was paid in full in 2011.
Since 2007, 12 loans with an approximate principal of $171,000 have been paid off, Gallina says. Two loans -- to the Kwong Wah and the Townhouse -- with approximate outstanding loan balances of $88,000 were foreclosed on, and the city kept the property. Three loans with approximate outstanding loan balances of $109,000 have been written off and sent to collections. One loan -- to Seavey & Young -- remains in litigation. Seavey & Young borrowed $229,882 with the intention of renovating several downtown buildings; $207,036 remains outstanding.
The city currently has six active loans that it is receiving payment for, representing a total outstanding amount of $198,840.
Tim Crowe, owner of Jo's Diner, received a $120,000 loan from the fund in June of 2013. The loan enabled Crowe to purchase the location along with equipment to improve the Calais staple's efficiency and sustainability as a restaurant and job provider. "The loan was very helpful, and I appreciated it. The city has been great to work with in general," Crowe comments.
"While the loan is a great tool for economic development in Calais, I know the city took some losses and understand why they would want to end the program," Crowe adds.
On January 13, the city council voted unanimously to end the fund, a decision that was preceded by a discussion "centered around the recent failures of the program and sentiments that the city shouldn't be in the business of loaning money," says City Manager Mike Ellis.