Marshall Municipal Utilities agreed Tuesday, Sept. 14, to purchase Marshall-Saline Development Corporation's "spec building" located in the industrial park.
The $440,000 deal will free MSDC from having to make principle payments on the empty building. When the spec building was built, MSDC set up the loan in an interest-only payment arrangement. Changes to banking laws have since increased MSDC's payment to include more than $20,000 of principle payments, said Kyle Gibbs, general manager of MMU and a MSDC board member.
"I think it's a good deal for everybody. It takes a tremendous load off of us," said MSDC Director Roy Hunter. "Our first principle payment would have been this year. Our principle is just a shade under $30,000."
Currently MMU pays $30,000 per year in membership dues to MSDC. That fee will be waived for ten years under this deal, equating to a savings of $300,000 for the utility.
The money used to pay for the building will come from MMU's electric reserve fund, which is currently invested at .5 percent interest.
After the deal closes, the net effect for MMU is a 6.8 percent annual return based on the saving of the $30,000 membership dues.
"MMU doesn't plan to upgrade the building to the level MMU needs to be able to use it," Gibbs said. "It is still for sale."
If the building sells within the next 10 years, MMU will be reimbursed the purchase cost and any income higher than that level will be returned to MSDC. If the building does not sell within 10 years, the building will belong solely to MMU.
The MSDC voted unanimously in favor of the sale -- with only Gibbs abstaining due to the potential conflict of interest.
The purchase includes about eight acres of land.
"This is a win-win situation," Gibbs said.
The sale will still need to be approved by the Marshall City Council.