Fair seeks loan

 
 
Updated 11/29/2010 6:45 PM

Federal loans and guarantees are needed to right the ship and help the new Lake County fairgrounds reach its potential, officials say.

"This loan is really the primary step in the fair's rehabilitation and advancement into a modern fair and exhibition center," said Rudy Magna, attorney for the Lake County Fair Association.

 

The application pending before the U.S. Department of Agriculture would in a sense clean the slate for the group, but maximizing the use of the facilities at Peterson and Midlothian Road will become the top priority to pay the debt.

"There's going to need to be more and better at the fair than there has been in the past," Magna explained Monday during a required public hearing for the USDA community facilities loan program.

The fair group is seeking up to $7.5 million to repay debts owed to contractors, pay off and convert a short-term construction loan, and complete an exhibition center.

While there is substantial value in the land and facilities at Peterson and Midlothian roads, the fair is strapped for cash. Magna said a recent appraisal valued the facilities at $23.5 million, down from a pre-recession $31 million.

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"You can't pay bills with dirt," he said before the hearing.

The association had a tentative deal to sell some of the property for $3 million, which would have taken care of most of the obligations, but the buyer backed out because of the economy, Magna said.

The property now is regarded as significant collateral for what would be the first USDA community facilities loan in Lake County. Those loans are made to communities or nonprofit groups in rural areas and towns up to 20,000 in population.

Mounting debt has become an issue for the association, which in 2009 moved from its longtime home at routes 45 and 120 in Grayslake about four miles south to the new site in the village.

Magna acknowledged there has been "some pain, some disappointment," since.

"The move was a good move. Cash flow wise, it just didn't turn out as originally anticipated," he said.

                                                                                                                                                                                                                       
 

Frustration came to a head Nov. 16, when the fair board was assailed for what association member Greg Koeppen described as a financial disaster.

Board President David DeYoung resigned a few days later and was replaced last week by fair board member Mike Richards.

The fair association owes $2.3 million in principal and interest on a construction loan, which is due, and about $4 million to contractors, Magna said. Another $1 million will be needed to complete a 15,000-square-foot events center and other work.

The exact amount to be borrowed is being finalized. About a third would be a direct loan from the USDA. The rest would be borrowed from Ridgestone Bank in Schaumburg, with the USDA guaranteeing 90 percent.

"The taxpayers of the United States are not being put at risk," Magna said. "The value is here."

The fair association would have two loans with one payment and a 40-year term. Cash flow would be monitored monthly, rather than quarterly and the loan would include a reserve so the fair would not immediately be under the gun.

The USDA loan has a current interest rate of 3.75 percent. The rest of the amount borrowed would be at market rate.

"For most organizations, our loans are really the best rate you can get," said Joan Mussina, public information coordinator for the USDA.