Mooresville’s town board on Monday night approved a nearly $400,000 loan to the MI-Connection cable and internet system to help cover a budget shortfall this fiscal year.

By a 5-1 vote (with Commissioner Thurman Houston voting “no”), Mooresville’s board agreed to a budget amendment authorizing a $396,415 loan to MI-Connection.

Monday’s action followed a vote by Davidson’s Town Board three weeks ago that will allow Davidson to contribute its $180,000 portion of a total $576,604 gap in the budget of the cable system, which is owned by the two towns. The system had asked the towns last month for money to help cover the shortfall.

Maia Setzer, Mooresville’s finance director, said in an interview she presented the request in the form of a loan because “we anticipate they will pay pay it back.”

The resolution calls for the loan be repaid in full in 2015. Ms. Setzer said she will return to the board later to present detailed terms of the loan. The money will come from the town’s fund balance, or cash reserves. Ms. Setzer also said she likely would come back to the board at its May meeting for approval of budget cuts or other budget amendments that would allow the town to repay the $396,415 to its reserve funds.

The money is needed in part because MI-Connection’s revenues are not enough to cover debt payments and other non-operating expenses.

The resolution presented to the Mooresville board said the money was needed in part to help pay for MI-Connection’s appeal to the state of North Carolina for a refund of sales taxes the system paid on equipment and services.

In January, MI-Connection board members, who include representatives from Davidson and Mooresville, were told that the state Department of Revenue was denying a refund of $400,000 in sale taxes. The $400,000 was listed as revenue in the original 2009-10 budget.

MI-Connection says it’s entitled to a refund because it is owned by the two tax-exempt town governments. The $400,000 is sales taxes the system paid on items and services it purchased in 2008.

The system’s revised budget now treats that $400,000 as an expense, at least until the dispute is resolved.

The system also could be liable for 2009 sales taxes. The fate of the tax payments won’t be known until MI-Connection either reaches a settlement with the state, resolves the dispute in a lawsuit, or persuades the state legislature to pass legislation specifying that it is exempt.

OWNERSHIP CALCULATION APPROVED

The Mooresville board also approved a routine resolution setting the balance of financial interests in the system between the two towns as of June 30, 2009. The calculation is required annually under the two towns’ Cable Television System Interlocal Agreement.

Mooresville’s interest this year is set at 68.75 percent, while Davidson’s is 31.25 percent.