By David Howell
OAKLAND – Another casualty of the ill-fated beef processing plant surfaced in Monday’s supervisors meeting after Oakland Mayor Riley Swearengen reported that Oakland Yalobusha Natural Gas District is in arrears with one of the two U.S.D.A. loans that financed the construction of the gas district.
Swearengen told supervisors that the district’s financial problems are two-fold; not having the usage originally anticipated when the beef plant was operating, and not having enough residential customers. The district currently services 212 customers, more than a 100 under the 350 customer benchmark needed to make the district financially viable, Swearengen explained to supervisors.
“This gas district has gotten behind on its payments due to the beef plant fiasco, you know all about that,” Swearengen explained.
The district was financed with two loans, a $1.2 million dollar loan from U.S.D.A. to the district for the initial construction, and a second, smaller loan of $565,000.
“We started out with $1.2 million, just to bring gas 11 miles to the western part of the county,” Swearengen said. The purpose of the initial loan was to service residential customers, or small businesses, the Oakland mayor explained during Monday’s meeting.
“We went back and borrowed another $565,000 to make the lines bigger, where they would accommodate the new facility there,” Swearengen said, referring to Mississippi Beef Processors, LLC, a beef processing company that operated for four months in late 2004 before folding.
The Oakland mayor noted that the district is servicing the debt from the first note, but the second, smaller note went unpaid for four years after the beef plant closed. The district is now paying a portion of the second note, Swearengen reported.
Swearengen also said the loans are covered by a bond issue.
Swearengen prefaced his appeal to supervisors that the district had been a success for western Yalobusha, noting that Windsor Foods would likely not be in production without the district.
My appeal to the board… is whether you would be interested in buying it,” Swearengen said, adding the request was something U.S.D.A. had asked him to bring to supervisors.
“I didn’t come here expecting a yes,” Swearengen prefaced his pitch. “They (U.S.D.A.) made an appeal to us, saying they will litigate the whole thing, sale it and get done with it,” Swearengen said about the current status of the project.
Swearengen also recalled obstacles the gas district had faced since opening, starting with a $70,000 unpaid gas bill the district was stuck with following the closing of the beef plant in 2004.
This bill was paid with a $70,000 loan from the Town of Oakland, a move made after Tennessee Gas threatened to cut the district off. This loan is being repaid at $500 a month, Swearengen said, adding that Oakland would likely not be repaid if the district is liquidated because the loan is unsecured.
“We probably would have just let it fold back then,” Swearengen said after the beef plant closed in 2004. “But, we had put people on, they had changed over, converted over,” he added, referring to the district’s residential customers who had converted their appliances to natural gas.
“We didn’t get the people because the conversion of a lot of the appliances in the house,” the mayor said. “A lot of people said they could not afford to buy new appliances,” Swearengen said, adding that people in the area would like to use the gas because it is cheaper than propane.
“This is one of those songs, Mayor, that we weren’t quite ready to listen to,” Board President Amos Sims responded, as board members were apparently hit cold with the request.
“Windsor, I am sure you are aware of expanding right now, with intentions of expanding even more in the coming year,” Supervisor Tommy Vaughn noted, referring to Windsor Foods, the business that i. “Is that going to be enough to offset that?” Vaughn asked.
“What Windsor is doing, they came to us. They don’t buy gas from the district. What they are doing is using our lines… they just pay are paying us a transportation fee,” the Oakland mayor explained. Riley also told supervisors that Windsor Foods uses less than a fourth of the gas that was expected to be used by the beef plant.
Swearengen said the district had met with the state’s U.S.D.A. director in April, and he noted that if the district was liquidated the price would likely be much less than the amount of the two outstanding loans.
“When we will you know something,” Sims asked about the potential liquidation of the district.
“We are constantly in contact with the Congressmen’s office, they said they will get back to us, they will let us know,” Swearengen answered. “The stimulus money isn’t going to trickle down to us… If some way was possible for them, that is what we are hoping, that they can find an avenue to funnel some (stimulus) our way, to refinance it or do something to keep it operating.
Swearengen did assure supervisors that someone would likely buy the district, if it was liquidated, and it would remain operational.
No action was taken by supervisors. Swearengen asked the board to send him a letter informing him of their decision so he can report back to U.S.D.A. Area Director, Johnny Shell.