KETCHIKAN (AP) -- The Ketchikan Gateway Borough Assembly has offered to pay $88,098 to the U.S. Department of Agriculture to settle a debt that arose from a loan guarantee for a local wooden bowl manufacturer.
The department's rural development program loaned $500,000 to Alaska Forest Creations, a private bowl manufacturer, with $300,000 guaranteed by the borough.
The value-added wood manufacturer was one of Ketchikan's first attempts at switching from decades of pulp production to a smaller-scale timber products.
Alaska Forest Creations closed its doors in March 1999 after a few months of making bowls. The company blamed the closure on a lack of raw materials, production problems and the pressure to repay its debt.
The owner, Anchorage resident Michael Ronchetti, filed for federal bankruptcy protection in August.
The USDA rural development office subsequently demanded payment of $278,000 from the borough.
The assembly ordered an audit of the loan and Anchorage attorney Joseph Levesque concluded that USDA loan money was used to repay Alaska Forest Creation shareholders' loans to the company. The $189,900 difference between USDA's demand and the amount the assembly authorized Monday is equal to the money paid to shareholders, said Borough Assemblyman George Lybrand.
The assembly authorized on May 1 authorized Borough Manager Georgianna Zimmerle to negotiate a final settlement with USDA.
Zimmerle said Wednesday the borough's offer has been verbally and conditionally accepted. She said the borough expects final acceptance or rejection of the offer by next week.
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