Getting an economic development loan from the city is complicated, but for the purposes of this story, consider two major steps: First, the Assembly says yes, ok, you can have the loan, and then city staff draw up the paperwork. The loans need to be secured against some property of the borrowers – collateral of sorts that the city can take if the borrower stops making loan payments.

But Fortress of the Bear leases its property from the city, so the city says collateral won’t work in their case. And Tuesday night, two weeks after granting the organization its loan – remember that was part one of the process – the Assembly decided to make a change to the loan paperwork – part two of the process.

The city will keep $20,000 of the $100,000 loan, and apply it toward anything Fortress might owe should it go out of business or go bankrupt. So Fortress comes away with $80,000 instead of $100,000.

“It’s almost absurd how this is being played out, said Evy Kinnear who runs Fortress of the Bear with her husband, Les.

Not to be rude, she said, but the process as explained to her by then-finance director Dave Wolff is not the process she says she saw Tuesday night.

“Dave Wolff pulled me aside, he said (Municipal Attorney Theresa) Hillhouse is out, she’ll be in Monday, I will have the loan docs drawn up, and you can come and we’ll have everything ready, and you should all be funded by the end of the week,” Kinnear said.

But three days after that meeting, Wolff resigned, and when Hillhouse returned from vacation the following Monday, she went to draw up the paperwork, and noticed there was nothing for the loan to be secured against. The collateral problem.

Evy Kinnear told the Assembly Tuesday night that she and Les didn’t mind if they city reserved the money, but that they would prefer to put it in an escrow account.

“If you want to take the money, we’ll put it there,” she said. “It’ll gain interest and at some point it will be ours to pay back and we’ll pay back the $100,000 that way, instead of an $80,000 loan. It just doesn’t compute as far as I’m concerned.”

Assembly member Phyllis Hackett said the change in the loan put the city in a tough position. On one hand, she said it would be better if the city had more time to consider the problem with the loan. On the other hand, she recognized that the clock is rapidly ticking toward visitor season – it begins in a couple weeks – and that Fortress of the Bear is eager to get work done before guests start arriving.

Mayor Cheryl Westover said time was not something the Assembly had in this case.

“I think we need to make a decision,” Westover said after about 25 minutes of discussion and debate on the subject. “I think $80,000 is pretty generous for no collateral. It covers the city and it covers anything that may happen out there. Not that it will, I don’t believe it will, but I think $80,000 gets them started. There’s nothing that says they can’t come back and ask for another loan.”

Assembly member Thor Christianson, on the other hand, says the Assembly knew there was no collateral, but approved the money anyway.

“This is economic development money,” Christianson said. “We know this is risky. This is the point of it.”

He questioned whether setting aside $20,000 would really be helpful to the city.

“I think the risk of us not getting this money back is quite high,” he said. “The question is the same question we had last meeting: Is that OK? Is trying to get jobs and businesses in Sitka worth that risk? I don’t think there’s anything we can do, no motion we can make, that will make that risk less. This $20,000 … OK: So we’d lose $80,000 instead of $100,000 out of that fund.”

The Assembly unanimously approved holding back $20,000 dollars, and giving the Fortress an $80,000 dollar loan. Larry Crews and Terry Blake were absent. Mim McConnell recused herself because Fortress of the Bear is a client of her publishing business.

Reached by phone after the meeting, Les Kinnear said the loan money will be used to help keep employees and make facility improvements to the Fortress, including a better driveway for bus traffic and a gift shop. But he also said the Assembly’s action Tuesday night was confusing, and that he won’t know exactly what he’s getting until he has a check in his hand.
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