EAGLE RIVER, MI – The Keweenaw County Board of Commissioners recently received a Delinquent Loan Servicing Letter from the United States Department of Agriculture Rural Development Community Programs – Michigan State Office regarding three delinquent bonds for the Keweenaw Mountain Lodge. The letter states that as the holder of the revenue bonds, the Rural Housing Service,USDA (the “Government”) is preparing to take action against the Issuer (Keweenaw County board) to recoup the principle and the interest of the bonds, unless the board takes actions set forth by the Government.

The letter stated that the Government is authorized and permitted to explore the possibility of adjusting the terms of the bond payments and the Issuer’s indebtedness, but only under certain terms, which are:

1. The county must be able to show that it can make payments on adjusted bonds, but cautioned that due to the amount of accrued interest that will need to be added to the principal balance of the new bonds, the size of the Issuer’s post-reamortiazation bond payments may be larger than size of its current bond payments.

2. Due to the county demonstrated inability to make its current bond payments, the county will need to pass a county-wide tax millage in an amount sufficient to cover the new bond repayment issues.

3. The bonds issued by the County to retire and adjust the county’s indebtedness will need to be general obligation bonds secured by the county’s full faith and credit, and not the net revenues of the Keweenaw Mountain Lodge.

The letter further stated that if county believes that the broader Keweenaw County economy benefits from the successful, profitable operation and management of the KML, in addition to the above terms, the county “should engage a professional hospitality/property management company to operate, manage and maintain its facility, as was recommended in both the Facility’s 2005 Feasibility Study and Place Dynamics LLC’s April 2016 Best Use/Re-Use Study for Keweenaw Mountain Lodge (the ‘Best Use’ Study’).”

The letter also cautioned that the county “should not be relying on on Keweenaw County employees to perform these functions” when, as the the authors of the Best Use Study concluded, was the KML’s “inability to remain open year around as the leading cause for the [Facility’s] current financial distress.”

The Keweenaw Mountain Lodge board was given 30 days respond to the letter after its receipt.