Dairy center looking at refinancing options
CALMAR, Iowa — Members of the Northeast Iowa Community-Based Dairy Foundation asked if a membership drive or fundraising campaign could generate funds needed to refinance debt during a discussion at last week’s annual meeting.
Dairy Foundation President Jed Becker said such efforts would likely not generate the cash needed given the current economic climate.
Some Dairy Foundation members said they didn'tt like the idea of giving assets to Northeast Iowa Community College.
"Those of us on the executive committee are in much the same frame of mind, but we’re out of options," said Chris Hagedorn, a Fredericksburg dairy farmer and foundation vice president. "If you’ve got other options, we’d like to hear them."
It was suggested that private entity be sought to buy the facilities and rent the Dairy Center back to Northeast Iowa Community College.
Becker said he recently learned of someone who might be willing to purchase the facilities, but Northeast Iowa Community College officials told him they wouldn't support such an arrangement.
NICC and ISU remain committed to the partnership and to the Dairy Foundation, said NICC president Penny Wills. The two entities continue to discuss additional education opportunities for the benefit of students. The Dairy Foundation’s facilities have been an asset to NICC’s dairy science and ag programs, which have grown from 25 students in 2000 to more than 120 students today.
In an interview with Agri News, Wendy Wintersteen, Dean of ISU’s College of Agriculture and Life Sciences, said ISU is pleased to continue its partnership with NICC and the Dairy Foundation. She explained why ISU can't continue to guarantee the foundation’s loan.
"Unfortunately, there were some actions taken way back when the partnership started that weren’t exactly how we would have had paperwork done in a very formal sense," Wintersteen said. "ISU as unit did not know about the loan guarantee that had been provided to the project. ISU, as a public entity, does not have the ability to legally guarantee what is essentially a private debt. At this point ISU is not in a position to do a guarantee in a more formal way. We’re very pleased NICC is willing to step forward and do the refinancing."
Wintersteen said that ISU has contributed over $1 million in cash in the last 10 years toward the Dairy Foundation and Dairy Center and will continue to support the efforts.
"No one can say ISU has not been contributing," Wintersteen said.
Gary Kregel, a Guttenberg dairy farmer and member of the foundation’s operations committee, said he is grateful the Dairy Foundation executive committee has been working to find a refinancing solution for the Dairy Center debt.
"This is not a financial disaster," Kregel said. "Thanks to the prior planning, we’re going to get through this, and we’re going to be successful in the future."
Prior to the annual meeting, members received a brochure explaining some the details of the proposed changes.
The brochure stated that there are no plans to shut down the Dairy Foundation’s dairy farm. A right of first refusal will be included in the agreement so that if, a decision is made to close the Dairy Center, the foundation would have the first opportunity to purchase the farm.
The original amount of the loan was about $3 million, and the current debt is approximately $2 million with a balloon payment due in 2011, according to the brochure. NICC hopes to be able to refinance over 30 or more years, reducing debt payments and making the entire dairy operation cash flow more efficiently.
More than 75 percent of the operating budget from the farm comes from the sale of milk, the brochure said. Whlle the dairy herd is currently producing at its highest peak since the beginning, uncertain milk prices affect the foundation the same as all dairy farms. NICC and ISU contribute significantly toward the budget, along with federal appropriations. Some funds are also raised by membership and sponsorship.
Banks look at cash flow, Becker said. The 25 percent of the Dairy Center budget that comes from grants, fundraising and earmarks is considered soft money by banks and is discounted.