City Councilwoman Nancy Saxton, who touts her business experience as she chases the city's top spot, has defaulted on payments to two loan companies - missteps she blames on a fire and a fight with her insurance company.

"This is a really embarrassing place for us to be. We've always paid our bills," says Saxton, who describes the situation as "horrific."

She distances herself from people who "have a lot of money" and yet still shirk their bills, saying it "goes to the character of the individual."

"We're doing everything we can to pay them."

It's why Saxton has sold her Saltair Bed & Breakfast, 164 S. 900 East, and a nearby duplex and fiveplex. It's also why Anderson Commons, a reception center at 734 E. 200 South, is on the market for $1.1 million.

Saxton and her business partner/husband Jan Bartlett defaulted on two loans earlier this year.

According to Salt Lake County records, Saxton failed to pay monthly payments of $2,909.50 from January to April to Greater Salt Lake Business District, which had loaned her $396,000 in 2004 for Anderson Commons.

The nonprofit company - which administers federal Small Business Administration loans - filed a "notice of default" on the property in May.

John Evans, vice president of the loan company, says Saxton recently paid up and the default notice will be removed. "The loans were brought current."

In June, JPMorgan Chase Bank also filed a "notice of default" for its $1.03 million loan because "required payments have not been paid when due," according to the county filing.

Saxton says she owes about $600,000 on that Anderson Commons loan.

"We are behind on payments," she acknowledges.

Saxton is seeking an appraisal of the property, which would be used to change the terms of the loan. "They [the bank] are working with us."

An August 2003 fire at Anderson Commons - investigators couldn't determine the cause - sparked the financial dive. Instead of putting money into advertising the center, Saxton had to sink it into reconstruction because she says her insurance company stalled. She didn't receive $484,009 for the loss until several months later.

"The dominoes at that point had already started to fall," Saxton says. "It was tens of thousands of dollars we were paying on the building."

Since January 2005, Saxton and Bartlett have been pursuing another $494,000 from insurance to cover business interruption and income loss. They still haven't received the money and have sought help from a court.

"A year made a big difference to us. We were up to date and everything was current until the first of this year," she says. "The insurance company never came through. . . . What we were forced to do is put all the buildings up for sale, not knowing which ones were going to sell."

Saxton also has a $392,500 loan from Salt Lake City, given in 2003 to cover start-up expenses at Anderson Commons. That amount has been slashed to $12,670 as Saxton has sold other properties to pay the debt.

The two-term councilwoman expects that as soon as Anderson Commons sells, the first two loans will be paid off. The one with the city may take more time, depending on the sale price.

The city is cutting her a break: Instead of requiring the bill be paid at the time of the sale, the city will extend the loan five years. The city also had waived payments for six months.

City Attorney Ed Rutan insists the city hasn't treated Saxton more favorably than other loan recipients. "I don't think the city feels we have done anything for them that we wouldn't do for our other borrowers in similar situations."

And Rutan says lending a council member money from the small-business loan fund doesn't violate the city's conflict-of-interest policy, which aims to "prohibit public officials from receiving unjust financial gain from public service."

Because Saxton was not part of the loan-approval process - Mayor Rocky Anderson OK'd the loan after a committee of mostly city employees gave her application 94 out of a possible 100 points - there was no conflict, Rutan says.

"The advice that we always gave was her application had to be treated like any other citizen's application would be treated," Rutan says. "And it was."

Three liens also had been placed on Anderson Commons. Two, totaling nearly $44,000, have been satisfied. Saxton wasn't aware of a third, for $5,255.

The councilwoman initially said she was selling Saltair, the duplex and the fiveplex because she wouldn't have time to run them while running for mayor.

Now, she says she would have kept those properties for a time before unloading them. But because the more expensive and historic Anderson Commons - it was built for a polygamous family in 1891 - didn't sell quickly, she had to dispose of those other companies first to cover her debts.

Saxton knows some potential voters may not be forgiving. But she notes she didn't dodge her debts by filing for bankruptcy.

"We have the ability to go into foreclosure on Anderson Commons and go through a legal wrangling with the entities and not pay them their money. That's not the way we do business," Saxton says, adding that she has shoveled her salary and retirement fund into paying bills. "It has been devastating for us financially and emotionally. It's what you do. You're good to your word."

hmay@sltrib.com