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East Grand Forks loan files lack information

Incomplete records for economic development loans are creating some frustration for East Grand Forks city officials.

City staff members have been compiling information on previous loans in recent weeks. But City Administrator David Murphy said recently that many of the loan files are missing documentation, and their status remains unclear.  

“We were just trying to get a handle on what was out there, because there wasn’t always a lot of documentation on it,” Murphy said.

Murphy said the city took on the project after an independent audit revealed problems with city economic development loans, including a lack of documentation. That audit only looked at the past three years worth of loans, Murphy said.

A spreadsheet compiled by a city intern and provided to the Herald by Murphy shows more than 20 business loans, many of which are missing some information.  

The documentation is not conclusive or complete on a majority of these,” Murphy said. He said he wasn’t exactly sure why information was missing, but said there had been some poor record-keeping and that it’s possible that some records were destroyed in the 1997 Red River flood.

The city’s longtime Economic Development and Housing Authority Executive Director Jim Richter retired in mid-May after being put on paid administrative leave. That came after city staff members in late April revealed the existence of a $510,000 loan that hadn’t been paid for more than a decade.

Richter didn’t return a message left at his home this week.

Lack of info

The spreadsheet divides the loans into several types, like the U.S. Department of Agriculture Intermediary Relending Program or Minnesota Investment Fund. It also includes a subhead for “unknown loan type.”

Next to a $41,000 loan for Eastside Express, the spreadsheet notes that the account was paid down to $28,267 in December 1996 but documents showing the loan was consolidated or paid were not found. Scott Baldock, the owner of the business, said the loan has been paid up.

Similarly, the sheet indicates two loans totaling $90,000 hadn’t been fully paid by TNT Outfitters. But Murphy said someone from the company has recently presented information showing they are current on the loans.

Murphy said loan files should include information like a loan agreement, amortization schedule and receipts. In some instances, Murphy said they were alerted to existence of a loan because it was referenced in meeting minutes.

Making the city’s efforts even harder is that some businesses included on the spreadsheet are no longer operating. A $100,000 loan for the Blarney Mill and Pub was paid up, but “doesn’t appear to cover the interest,” the sheet states.

“I doubt on some of these that we’ll ever really be able to conclusively find anything one way or another,” said Murphy, who became the city’s administrator last fall.

“It’s a very frustrating thing for me because I’m asked questions that we should have the answers to,” he later said.

New director

Murphy said the loan documentation project will take a back seat for a few months until a new economic development director is hired. He said he hopes to have one in place by December.

“We’re down staff on it,” Murphy said. “This is really on hold until we get somebody new in place.”

An official with the St. Paul-based advisory firm Springsted Inc. will interview EDHA board members Monday about what characteristics they’re seeking in a new director, Murphy said.  

In the meantime, Murphy said the city has put a checklist in place to make sure all new loan documentation is in order.

John Hageman

John Hageman covers North Dakota politics from the Forum News Service bureau in Bismarck. He attended the University of Minnesota in the Twin Cities, where he studied journalism and political science, and he previously worked at the Grand Forks Herald and Bemidji Pioneer.  

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