KIMBALL, Tenn. - City leaders unanimously approved loan terms from a local bank for Kimball's $750,000 commitment to the Marion County Regional Institute for Higher Education.
The Kimball Board of Mayor and Aldermen voted recently to accept a bid for the city's loan request from First Jackson Bank, which offered a 3.01 percent interest rate for 12 years.
Another option presented to the board by a local government agency would have given Kimball the money for seven years at a 2 percent interest rate.
The loan from First Jackson Bank will require a yearly payment of $75,391, City Attorney Billy Gouger said.
"The [other offer] would generate an annual payment obligation of approximately $115,883," he said. "Obviously, the annual payment is significantly more but, of course, the savings is in the interest that you're going to pay."
Mayor David Jackson said the shorter term and lower interest rate is "a good deal and a good price," but he is "a little scared" of the amount of the yearly payment.
The city has two more annual payments of about $77,000 left on its fleet of new police cars, and when that is done, he'd feel "more comfortable" paying the $75,000 per year rather than $115,000, Jackson said.
For the seven-year term, the city would pay $61,187 in interest, Gouger said, but the bank's 12-year term could cost the city up to $154,698 in interest payments.
Alderman Mark Payne said a longer term with a lower payment will allow Kimball to contribute more than the minimum when it can so it can pay the loan back earlier and potentially erase the difference in interest payments.
Gouger said neither of the loan offers include a prepayment penalty.
"[Kimball] is not locked into this payment schedule," he said. "You have a minimum payment schedule, but there is no maximum payment schedule."
Being obligated for $75,000 per year is much more appealing than $115,000, Vice Mayor Rex Pesnell said.
"If we can do better [on the annual payments], we will, and then the interest probably won't be nearly that much," he said. "I'm thinking that's probably the best route to go."
Officials said the bank loan will still have to be approved by the state comptroller's office before the money can be released, and city leaders plan to set up the payment schedule so the first installment won't come due until the 2015-16 fiscal year.
Ryan Lewis is based in Marion County. Contact him at firstname.lastname@example.org.