BookSmart wrote its final chapter. But wait, there’s more.
In what could be a cliffhanger over the fate of the longtime Morgan Hill mainstay, the City Council voted 3-2 April 4 to explore a potential bridge loan that could save BookSmart from imminent closure.
But the store’s owners aren’t out of the woods yet. Not even close.
For the first time in the history of Morgan Hill, the city is considering issuing a loan to a private business. If the council approves the transaction, it would be a $175,000 loan to BookSmart, which would come out of the general fund.
Mayor Steve Tate and Mayor Pro Tem Rich Constantine voted against the action, citing that BookSmart would be out of business by the time a loan could be secured. But, the people spoke, and Councilmembers Rene Spring, Larry Carr and Caitlin Robinett Jachimowicz listened, and they voted to explore a stay of execution for BookSmart.
Aside from publically driven fundraising, BookSmart must prove that a loan of money will not just stave off the creditor wolves in the short term, but show that long-term fiscal solvency will make good that BookSmart can pay back its loans.
“We think there’s going to be a lot of work ahead of us to get the information that is needed, and a plan in place,” BookSmart co-owner Brad Jones said. “We are hopeful, but we don’t think the city will be a pushover. They are very careful about using general funds, especially to help an individual business.”
Owners Cinda Meister and Jones say that business as usual at their new location at 1295 E. Dunne Ave. has been fine. It pays the bills. It’s the debt they incurred during the move and transition—credit card, cash advances and personal loans—that has swallowed BookSmart’s future.
“Whatever loan could be arranged, this has never been done before,” said Morgan Hill City Manager Christina Turner.
BookSmart had previously applied for and was denied a loan from the Grow Morgan Hill Fund, which is managed by the National Development Council. Funds for the Grow Morgan Hill Fund came from the remnants of the former Redevelopment Agency. The National Development Council decides who qualifies for loans, and because of a combination of financial considerations, BookSmart did not qualify for a loan.
“There are some high-interest loans and late payments that the Grow Morgan Hill Fund would need to see retired and put in good status and to show that that pattern would not be repeated,” said Morgan Hill Assistant City Manager Leslie Little.
The city must also determine if issuing a loan of public money from the general fund to a private business is legal.
“Part of our due diligence is to make sure it is legal, and typically these kinds of loans require is to make sure it is in the public interest,” Turner said.
As city staff works to determine if they should issue a loan to BookSmart, they will also work preparing the city’s two-year budget. Like the rest of the story, only time will tell.
“We haven’t set a timeline yet, and it will take the city some time to review their finances,” Turner said.
