No decision was made last week concerning the proposed amendment to the ground lease between the Mercer Island School District and the Boys & Girls Club of King County. The amendment, which would allow the Boys & Girls Club to gain a line of credit from U.S. Bank, is still being tweaked by the parties involved. Members of the School Board shared their concerns about the amendment with Boys & Girls Club of King County CEO Daniel Johnson, who was present at the district’s board meeting last Thursday.

“I think, as a board, we’ve tried really hard to accommodate the Boys & Girls Club, and the more I’ve thought about it, the more I come to the conclusion that we have a fiduciary duty to this community and all along we believed we had nothing to worry about,” said board member Lisa Strauch Eggers. “When I first read that amendment, you could have knocked me over with a feather.”

The board has expressed its frustration over the current situation and Johnson assured the group that earlier in the spring, when they first started working with the bank, he had no idea that the situation was going to require an amendment to the lease.

“We regret we are in this difficult situation. I am sorry that we contributed to any type of confusion around this,” said Johnson. He further explained to the board that the $8.2 million which the club is seeking from the bank is less like a loan and more like a line of credit, one which the club will pay down as pledges and other money for the project comes in. He said the club submits invoices directly to the bank, which the bank then turns around and pays to the construction company or whomever the services are for.

“This was unintentional, but I also want to do anything in my power to continue on with our schedule. Right now, we are on schedule to open in June,” said Johnson. “From my discussions with the bank, in many ways this is an insurance policy for the school district. This financially reduces any risk for the school district.”

He said that the club has confidence that they will pay off the line of credit well within the time frame outlined in the proposed amendment. He said the club has collected all but $3 million of the $8 million in pledges for the project.

Johnson added that, from the club’s point of view, it was assumed that everyone understood a line of credit or loan would have to be applied for, as this is the way that all nonprofit organizations must operate when working on such a large capital project.

“I assumed it was understood,” Johnson said. “We want to do whatever we can to work this out. We see this as a long-term deal [to work with the district.] I’m hoping we can find some resolution, and we are applying as much pressure to the bank as we can. I feel a little bit helpless to tell you the truth. I don’t know what we could say to show you we’re only using this for its intended purposes.”

Board member John DeVleming said he understands why the club would need a line of credit and that they are eager to see the project finished, but he wanted Johnson and the Boys & Girls Club to understand why the agreement was ruffling so many feathers with the district.

“Coming in at this point in time has raised so many questions. No one expected it would come to this,” he said.

Board President Janet Frohnmayer told Johnson that she and the rest of the board were surprised when they learned about the club’s intentions to have a third party enter the agreement. She said that after so many months of people questioning whether or not the club had the money, this feels “a little confirmatory” that maybe the club did not have all the money it said it did prior to construction beginning.

Johnson said that pledges were coming in, but that many of those promised dollars were conditional on various aspects of the project, such as gaining building permits or breaking ground. Now that some of those conditions have been met, the money is coming in.

“This is extremely common,” said Johnson of the club asking for a line of credit. “It’s almost out of the ordinary that it is for under five years,” he said of the proposed agreement with the bank. The current proposal indicates that the line of credit would be paid off in five years.

“We all want to see the building be built and see all of this behind us,” said Superintendent Gary Plano.

The district and School Board will wait to make a decision on the issue after they and their legal counsel have seen the documents from the bank, which were delivered to the district last week, according to Johnson. It is possible that a decision could be made during the Sept. 24 School Board meeting.