The Le Mars City Council, following a closed session Tuesday, agreed to accept $60,000 from Harker's Distribution Inc. as partial payment on its nearly $300,000 debt to the city.

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City Administrator Scott Langel said the city will, in turn, release any liens and encumbrances on Harker's real estate property being sold to O.B. Investments, Inc.

"It's about 20 percent of the property," said City Finance Director Bill Cole, explaining the $60,000 payment represents about 20 percent of Harker's Distribution's debt.

"We still have the mortgage on the rest of the property, the 80 percent," Cole added, explaining that is collateral on the rest of the loan.

Harker's Distribution, Langel said, will continue to make monthly payments to the City of Le Mars pursuant to the existing agreement.

After this $60,000 payment, Harker's will owe $223,342 on the Le Mars loan, which dates back to February 2006.

That month, the City of Le Mars agreed to loan Harker's $500,000 for a potential expansion.

The idea behind the loan was to help Harker's secure $1.5 million in economic development money from the state of Iowa.

The state loan was settled last November, according to a spokesperson from the Iowa Department of Economic Development. When Harker's leaders sold off the distribution end of their business, they paid back the funds to the state, including a 6 percent penalty for not completing the project as described in the project application.

Harker's officials are continuing monthly payments and are up to date, according to Cole.

The final payment is scheduled for March 2010.