City loans steel fabrication company $25,000

SOUTH PORTLAND – The City Council recently voted to approve a $25,000 “gap financing” loan to a longtime South Portland company to help it stay afloat in the recession.

The council approved the loan at a hastily called special meeting on Friday, Nov. 20. Before the council’s 5-1 public vote to award the loan to Megquier & Jones Inc., a structural steel fabrication company, it met in a closed-door session to discuss the issue.

Mayor Tom Blake said the city is not in the habit of lending money to struggling companies. “It is unusual,” Blake said. “However, these are unusual times. I think that’s the difference.”

But Councilor Linda Boudreau voted against the loan because she believes it was not in the city’s best interest.

“I just thought it was risky loan. It was just too risky to gamble the people’s money,” Boudreau said. “I’m incredibly sorry for a company having a hard time and all that, but we’re not in the bailout business.”

John C. Yohe, president of Megquier & Jones, located at 1156 Broadway, noted in an e-mail communication that the 114-year-old company has been in the city for 47 years. Last year, the company had 49 employees, many of them city residents.

Yohe said that the company is “appreciative of the city working with us on a loan that is only a portion of a comprehensive financing package involving other entities.”

The $25,000 loan the council approved is only 12.5 percent of the $200,000 the company needs, according to the city. The city says Megquier & Jones needs the revenues to tide the company over until it gets paid for $1 million in projects already under way.

The Finance Authority of Maine is expected to work with the city in assisting the company by providing a $150,000 loan. Blake said the company also hopes to get a $25,000 loan from the Greater Portland Council of Governments.

“It is a risk,” Blake said of the council’s vote to have the city loan the company money. “Anytime you make a loan, it’s a risk.”

However, Blake said, in voting for the loan – which will come from an account containing funds from a tax increment financing agreement the city made with Fairchild Semiconductor – councilors carefully reviewed all the facts and considered the risk worth taking.

Blake said the council weighed such factors as the fact that the company is a relatively large employer that has been a city taxpayer for decades. Also, the loan the council agreed is half the $50,000 the company originally was seeking from the city. Blake said that when the Greater Portland Council of Governments was identified as another loan source, the city could reduce the amount it loaned the company.

“I feel confident we made the right choice,” Blake said. “We did not do it lightly.”

He noted that the council met twice in closed-door sessions on the issue to discuss the company’s past performance and future plans for work. The first time was on Nov. 16. The council at its meeting later that night was scheduled to vote on a proposed $50,000 loan to Megquier & Jones. But councilors voted to postpone the vote until they had more information. Four days later, they met and voted on the smaller, $25,000 loan.

Megquier & Jones makes trusses and framing components for steel bridges and buildings.

The company has been in greater Portland since 1895 and in South Portland since 1962.

The loan is for five years. Interest will be set each year at the five-year treasury bond rate. For the first year, that interest rate is 2.3 percent.

Collateral is both business equipment belonging to the company and the owners’ personal property. Blake said the owners are using their own homes as collateral. If the company doesn’t repay the loan, Blake said, “we have recourse.”

Erik Carson, assistant city manager and the city’s economic development director, said the city’s tax increment financing agreement with Fairchild Semiconductor is written in such a way that the tax money derived from it can be used for revolving loans citywide. That agreement has been in existence for about two decades but was updated last year, he said.

On Nov. 19, the city announced a special council meeting scheduled for the following day at noon. Councilor Patti Smith was absent from the meeting. In addition to Blake and Boudreau, other councilors in attendance were James Hughes, Maxine Beecher, Tom Coward and James Soule.

The council recently voted to approve a $50,000 Community Development Block Grant construction loan to a company building a nine-unit condominium project for developmentally disabled adults at 20 E St. The project, designed to allow the residents to live more independent lives, is the first of its kind in the state.

The council’s Nov. 16 vote authorizing the loan to the E Street Development Co. was 7-0. Community Development Block Grant money is federal money administered by local communities. The five-year loan has a 1 percent interest rate. Collateral is the property itself.

Beecher said at the time of the vote: “I think this is a good use of (Community Development Block Grant) funds.”