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untanglingwebs
El Supremo
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A HUD study of Empowerment/Enterprise Zones suggested an unintended backlash in the operation of such zones. The study expressed concern about how these zones suffered from a proliferation of "undesirable businesses". Flint, now a Renewal Zone, is displaying that tendency towards undesirable businesses predominantly in the Mainstreet and North Saginaw Street area. Driving that area reveals too many bars, party stores and car washes. Motorcycle clubs and numerous clubs previously revealed in raids and i the media as after-hours alcohol clubs dominate some stretches of Saginaw Street.
There appears to be an element of "creaming" in the loan process. Applications for CCDC, Bank One and the SBA are in the files of numerous loan applications. It would appear that the "least desirable" loans were processed through FAIF. In many of these instances the level of risk from excessive debt levels and negative credit histories was unacceptable and the failure of these loans inevitable. A monitoring visit would have revealed these discrepancies and the ineligible costs for employees billed to this fund. FAIF was billed for time employees spent on SBA trainig and performing tasks related to CDBG, SBA, CCDC and the Mott Foundation Facade grant.
(Note: It was the Emergency Manager Ed Kurtz who failed to assist the monitoring attempts.) |
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Sat Jul 16, 2016 3:25 pm |
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untanglingwebs
El Supremo
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FAILURE OF THE FAEC TO ADEQUATELY PROVIDE OVERSIGHT OF THE FUND
In March of 2002, Nancy Jurkiewicz-Rich applied sanctions on the FAIF/CCDC board. The board of FAEC did not implement the sanctions and allowed further deterioration of the portfolio. Thus the FAEC board failed to safeguard the assets and monies of the revolving loan fund as required by federal regulations.
The board failed to insist that the required financial records be made available to FAEC and the City of Flint/ This should have been the first warning sign of potential fraudulent activities. |
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Sat Jul 16, 2016 3:33 pm |
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untanglingwebs
El Supremo
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FAILURE OF THE FAID/CCDC BOARD TO PROVIDE ADEQUATE OVERSIGHT OF THE FUND
The manner in which the FAIF/CCDC board conducted business should serve as an indication of the principles this board applied to the oversight of the revolving loan fund. The board allowed actual and potential conflicts-of-interest, showed favoritism in the loan process, gave a "bad" loan to Catfish heaven whch included eliminating a defaulted loan belonging to CCDC, gave a loan to an employee for an accounting office, gave loans to two family members of board of directors, and allowed the Executive Director to convert to his personal use a vehicle repossessed from Service Cleaners despite the fact that FAIF by-laws did not allow for corporate ownership of vehicles. The disposition of this vehicle violated federal disposition of property rule, the City of Flint Standard Operating Procedures and the guidelines established for the fund.
On the surface, there appears to be a relationship between Mr Hill and Donald and James Dover. Dover,Inc. bought the vehicle from Mr. Hill and helped hide the details of the sale. Hill once recommended selling CCDC property on Hemphill Rd. to James Dover without going through the proper procedures for the disposition of this property. The Dover's also own the land which housed the defaulted FAIF loan for Grundy's Collision. |
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Sat Jul 16, 2016 3:58 pm |
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untanglingwebs
El Supremo
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Another apparent conflict-of-interest is the relationship of County Commissioner Raynetta Speed to the CCDC board and the FAIF loan give to her brother Frederick Speed. Raynetta Speed helped initiate the Greater Beecher Business District, part of which is outside the zone, and s working with CCDC to obtain funding. The loan given to Frederick should have been publicly disclosed and HUD should have given an opinion as to the existence or appearence of a conflict-of-interest.
As a developer, Mr. Speed should have been ineligible for the loan and the loan exceeded the guidelines. Speed has a long history of federal tax liens and recently another tax lien in excess of $93,000 was filed against him and recorded in the Register of Deeds. Speed paid himself as owner and agent of Better Builders and Speed's Electric for the majority of the work on the project. The project has taken over 15 months and is not complete although signs advertising availability are on the building. The potential leases were said to be lost due to the delays i the construction process. The taxes on the property are past due for the second year and the property could enter foreclosure next year. A second plaza in the 3600 block of N.Saginaw is completed, but not fully occupied.
(The Zone plans required the vote and approval of the Genesee County Commissioners, so the loan to a family member of a commissioner should have followed HUD rules of disclosure. A FOIA to the county revealed no such requests for HUD approval.)
(Both plazas have been lost to foreclosures. The plaza at Saginaw and Wood also had a facade grant and a second loan for the parking lot.) |
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Sat Jul 16, 2016 4:21 pm |
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untanglingwebs
El Supremo
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The board failed to require annual reviews of the status of taxes and insurance on the properties used for collateral o loans and on repossessed assets. As a result 1606 Mabel, a repossessed property is on the demolition list for the city, The fund will be responsible for the costs associated with the demolition of the property. Some properties with loans and some repossessed properties are in arrears of their taxes. A new city ordinance assesses fees for fires to structures in the city. Most, if not all, insurance companies refuse to insure buildings that have been vacant for over a year.
The repossessed assets need to be properly disposed of and the money returned to the fund. Some of these assets have been idle for periods approaching two years. Staff indicated that storage costs were incurred in storing office supplies and equipment. These are wasted costs and the items decline in value.
In addition, the FAIF/CCDC Board should have initiated an investigation into the allegations made by Ronald Hudson regarding Executive Director Harold Hill. Those allegations should have been forwarded to the ity and HUD for review. |
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Sat Jul 16, 2016 4:37 pm |
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untanglingwebs
El Supremo
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Flint loan programs still taking chances on local businesses despite mixed success
Print Kristin Longley | klongley1@mlive.com By Kristin Longley | klongley1@mlive.com
on June 13, 2010 at 9:00 AM, updated June 14, 2010 at 7:06 AM
FLINT, Michigan — It’s arguably one of the poorest areas in the nation, but city loan programs are still taking big chances on small business owners — hoping to inject life into Flint’s nearly barren economy.
Millions in loans have been given out since 1998 — and more than $3 million of the federal and state taxpayer funds (including interest) still hang in the balance.
It’s a huge pot of money for investments that have had mixed success over the past 10 years, including one high-profile case of two businessmen convicted of pocketing $1.2 million of the loans.
Of the 31 businesses that have active loans, five are in bankruptcy or foreclosure, and 10 have had significant loan restructuring.
JTL.FLI0604WITHERBEESOPENS.05PT.JPG
Jeffrey LaMonde | The Flint Journal
Frann Parker, right, 56, wanders the selection at the newly opened Witherbee's Market & Deli with Jamie Stevens, 24, both of Flint. Witherbee's, 601 King Ave. in downtown Flint, was one of several small businesses that received a loan from the Flint Economic Development Corp.
It’s a risk city officials are willing to take, however, as the area struggles amid a nationwide recession. The public financing options can be a lifeline to the community’s small business owners who have trouble getting credit or low-interest financing from banks.
The federal and state funds are specifically geared toward the hard-hit area that includes Flint and parts of Mt. Morris and Genesee townships. Most of it went to small businesses, though some homeowners also received mortgages in the early years of the program.
“There are some positive things going on,” said City Councilman Bernard Lawler, who sits on one of the loan boards. Councilman Sheldon Neeley, another loan board member, said the investments are a great value for both the city and the business owners.
They point to the newly opened Witherbees Market & Deli in downtown Flint as well as two recent investments that could bring more than 150 jobs as potential success stories.
One of the program’s stellar borrowers, David K. Berry received a $75,000 loan to open Raspberries Rhythm Café downtown in August. He said the 5-percent interest rate was unbeatable.
“The rate was just unheard of — it was that simple for me,” he said. “The support has been great.”
Still, 17 of the 43 active loans are behind on payments — and eight borrowers are more than six months behind.
If the loans aren’t repaid — and the loan program staff isn’t aggressive enough with collections — federal officials could subtract the funds from future grant awards, meaning fewer funds would be available for the business owners who need them.
The two main loan programs are the Flint Area Enterprise Community (formerly known as the Flint Area Investment Fund), which serves one of the poorest parts of Genesee County in a 10-square-mile area of Flint and Mt. Morris Township; and the Flint Economic Development Corp., eligible to all qualifying Flint businesses.
Mayor Dayne Walling, president of the EDC board, said the programs in recent months have taken significant steps to improve the loan process, including hiring banking and legal professionals to help guide the process.
Loan officials want to avoid abuses of the program, such as the case of Joseph P. Giacalone and Daniel Robin. In one of the largest local cases of theft of public money, the two men pleaded no contest to stealing $1.2 million in loans for a factory they never built.
That was an extreme case of loan misuse, but officials said there are other loans that have been a struggle to collect.
Oil Chem, an oil recycling company located on 12th Street, declared bankruptcy two weeks after taking out the last of its $250,000 loan, which was granted in January 2009.
With interest, the total bill is now $266,000 and loan officials must now wait on a payment plan as the company goes through the bankruptcy process, said Robert Goodman, loan officer for the Flint Area Enterprise Community.
Councilman Scott Kincaid said the company never should have been approved for a loan, especially since it was behind on its taxes at the time, according to county tax records.
Oil Chem owner Robert Massey could not be reached for comment Friday. A message was also left for his attorney.
Also, Hinky Dinky Market on King Avenue, which owes nearly $200,000 on its 2001 loan for $376,000, is now in foreclosure.
The most overdue is Rocky’s Pizza, which has two loans and hasn’t made a payment since November 2008, records show. He owes $285,000, more than the $267,000 he borrowed because of interest.
Rocky’s owner John Varner said he plans to lease the building to pay off the loan. After starting the business, health issues that included triple bypass heart surgery and back surgery contributed to his money problems, he said, but he’s hoping to have a renter soon.
“I think I’ve had it with this one,” he said.
Goodman said the loan programs try to work with the borrower whenever possible, rather than immediately seize the property.
“The problem is, in this economy we don’t want to become landowners anymore than anyone else does,” he said. “We’re stuck with a couple that have been out there a little bit longer, but we’re still working with them.”
Concerned the city hasn’t done enough to collect on some of the overdue loans, City Councilwoman Jackie Poplar has asked for monthly status reports. She also wants to monitor who is receiving the loans.
“I am very interested in the businesses in the African-American community getting the loans we need to be getting,” she said. “These people are struggling and they’re striving to do business.”
Walling said the changes the loan boards have made will ensure that the loan terms are fair, but also protect the public funds.
He said the EDC board recently approved loans for two “exciting projects.”
Metro Medical Ambulance is relocating from Burton to a new Clio Road location using a $200,000 loan. The company has about 85 employees, and hopes to have up to 200 when it’s finished expanding, Walling said.
Kettering University’s K. Joel Berry also will receive a $43,000 loan for his Global Energy Innovations, which is projected to bring up to 80 jobs in the coming years.
Walling said the loan programs are looking fund a wider diversity of enterprises, including alternative energy.
“Today, in this economic climate, this is an incredibly important tool for our small and mid-size businesses,” Walling said. “We want to encourage development in all parts of the city.”
flintlongone Jun 16, 2010
I have been saying for a while now. Some reporter should do some investigation into where and how is all the grant money is being spent. All the neighborhoods in Flint that are getting a grant money how do we know it is not going into some one's pocket. With the large amounts of grants I just don't see the improvement that should be taking place. Some neighborhoods have been at this for years and still look like the ghetto.
pwtnos Jun 13, 2010
Kristin, if you are doing follow up to this article you need to check into the loan given the the so called grocery store that was supposed to open at the corner of Court St. & Stevens St. What happened to that money?
FlintTom
FlintTom Jun 13, 2010
Hmm. Nice stereotyping there, folks. In any case, the real issue raised here is the process of review by which loans have been and are being granted, and the oversight of the businesses afterward. The article says that the programs are now getting advice from bankers and lawyers. The implication is that this was not done before. Do you know, Kristin? If that were the case, the public officials involved ought to be given the boot. It would also have been useful to know if they were or are getting people with actual business experience involved - people who know how to assess a business plan, esp. for risky start-ups. Did they? Are they? That one of the businesses went into bankruptcy days after getting the final chunk of their loan, that another was able to rip off 1.2 million without doing what they promised suggests that the oversight was really bad. If this money were coming from an actual 'angel investor' there is no way that sort of stuff would happen. Kristen, there is a whole lot more to report on this one, involving potential incompetence on the part of public officials. Do you plan to do more than this article? It seems to me that you have only skimmed the top. This is not a criticism of what you have written; just a suggestion that there is more here worth looking at. Talk to someone who knows about these sorts of investments, the risks, what is reasonable, what counts as due diligence, and see if it was done, or if the loans were given out without having done the necessary work. It smells like rank incompetence, and it is just possible that you might uncover something worse - unethical or even illegal behavior, perhaps. |
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Sun Jul 17, 2016 6:45 am |
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untanglingwebs
El Supremo
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Concerned the city hasn’t done enough to collect on some of the overdue loans, City Councilwoman Jackie Poplar has asked for monthly status reports. She also wants to monitor who is receiving the loans.
“I am very interested in the businesses in the African-American community getting the loans we need to be getting,” she said. “These people are struggling and they’re striving to do business.”
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She also demanded in a committee meeting that Goodman explain the refusal of a loan to a specific store owner in her ward. That store owner had already defaulted on a loan, one that was suspicious in the beginning. |
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Sun Jul 17, 2016 6:50 am |
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untanglingwebs
El Supremo
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Witherbees failed, primarily because of high rent and landlord issues
The store at Court and Stevens never even opened up. An EDC loan. |
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Sun Jul 17, 2016 6:54 am |
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untanglingwebs
El Supremo
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On 10/5/04 Nancy Jurkiewicz memo to DCED regarding the DBG Admin Funding for FAEC
FAEC applied for $150,000 of CDBG Admin for FY 2004-05 . The budget assumed we would have $40,000 of public service carry-over from the past fiscal year and additional CDBG administrative funds that Suzanne and Joyce Parker would determine could be given to FAEC before June 30, 2004.
City published "TBA" or "to be announced" for the amount of CDBG funding to be allocated to FAEC.
All FAEC budgets submitted to your department are obsolete. Do you want another budget for CDBG administration and showing any other funds we have, lie the $53,977 273 fund that you can take to the Mayor for his review and approval? Do you think it would be helpful for Larry Foster to take the CDBG budget to the Mayor for approval? |
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Sun Jul 17, 2016 8:42 am |
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untanglingwebs
El Supremo
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I believe it will also require city council approval to award a contract to FAEC, just like funds that you transfer to another department.
It takes about $220,000 to operate a full scale program. Possibly $260,000 if we include a city-wide bus retention activity in low-income census tracts.
We used CDBG public service funds to provide technical support to residents involved in renewal community activities, like 3 citizen district councils and coordinating councils,Flint North Central Weed and Seed Program,Community Prosecution Trust Project, Greater Flint Health Employment Opportunity Program, and other strategies the city committed to in the course of actions submitted to HUD.
If FAEC is not doing this in this fiscal year, we could use CDBG public service dollars yo hold workshops for residents on the work opportunity tax credits and the earned income tax credits available to them. This was another activity we were supposed to host for RC residents so they are informed of all federal incentives available for them. Joyce Parker was going to look at CDBG reprogrammed dollars to see if any was available..... |
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Sun Jul 17, 2016 9:10 am |
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untanglingwebs
El Supremo
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HUD responds: 10/6/2004 Phil Graham, Department of HUD, Washington DC
Nancy, you should let your bosses know that HUD will have no choice but to pursue the de-designation of the Flint RC if the City chooses to not staff or fund the RC adequately. We consider the RC designation to be a valuable resource for any distressed community, so we won't let any of the designations go unused. Your designation is worth millions of dollars to businesses in Commercial Revitalization Deduction allocations, wage credits, work opportunity tax credits, and increased Section 179 deductions, and the bonus points under more than 20 HUD and other Federal grant programs that come with the designation give an advantage to organizations in Flint that apply for community development funds.
If HUD removes the RC designation from Flint and awards it to another part of the country, as we probably would do if the City neglects the designation, this would also generate negative publicity for the city and state.
Please share this information with your superiors and let me know by the end of this week if you thin anything will change. Thanks. Phil |
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Sun Jul 17, 2016 9:29 am |
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untanglingwebs
El Supremo
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Mt. Morris Township lost a good leader when they lost Supervisor Larry Foster. He supported the efforts to keep the FAEC and the loan program legitimate.
After a frustrating attempted monitoring visit on 8/30/04. e-mails were discussing the frustrations experienced by the staff.Kevin Groves and Charlotte Edwards had been with the enterprise community loan program and it's rules, from it's inception and had been trained to run. After Harold Hill had been hired in 2002, some believed the management style of the FAIF had changed dramatically. There was an agreement that somehow the FAIF "has been taken over by CCDC, which was not the intent of the enterprise zone loan program".
Much of the frustration came from the belief that Kevin Groves and Charlotte Edwards were protecting CCDC even if it meant the depletion of funds to keep CCDC operational. Charlotte Edwards comments that the program should have more frequent monitoring was extremely upsetting The distress came from the difficulty in obtaining documentation from Hill on the loan packages. And eve then it was stated the loan reports did not disclose when loans were part ofCCDC's other loan programs, such as SBA and CDBG. "Thus, CCDC sets the City and FAEC for monitoring findings for double billing staff to different federal funds", read one memo. |
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Sun Jul 17, 2016 7:06 pm |
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untanglingwebs
El Supremo
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City staff members agreed and stated it "seemed like deja vous all over again from last year's meeting". Staff felt the problem stemmed from a belief there was an issue of communication between Jurkiewicz and Hill.Staff noted that in the meeting Jurkiewicz repeatedly referenced attempts to outreach with Hill.
One senior staffer wrote:
"Charlotte is an active CWAC member and has been for some time. She knows that funds for management and oversight of a program must be directly tied to a program activity.
It is the responsibility of the recipient who receives the funds to self evaluate its program objectives and performance measurements to determine if they are being met. These recipient/subrecipient relationships are a 50/50 partnership. This is no different than staff from this department conducting pre-monitoring visits to ensure that we are all on the same page when HUD monitors the City's programs.
I am really interested in knowing what administrative fees are paid to CCDC for the SBA loans and what staff time is charged to the SBA programs. If the SBA program, as part of the administrative plan, is to be tied to the EC grant,then whatever funds are received for administration of the programs should reduce the management contract by that amount. This way, the EC fund could have a few more dollars in the pool." |
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Sun Jul 17, 2016 7:35 pm |
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untanglingwebs
El Supremo
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After the draft monitoring meeting in December 2004, CCDC was removed from it's monitoring position in a prolonged and tedious process, which included audits, lawyers and mediating withe state and HUD.
There were some key points in a second document written shortly after the December meeting with CCDC and FAIF boards.
" The original Memorandum of Agreement with HUD and the State of Michigan outlines the roles and responsibilities of the State and the City regarding statutory, regulatory, and contractual requirements as to the receipt and expenditure of the Social Service Block Grants. HHS should have monitored the FAEC as to the fiscal aspects of the grant and HUD should have monitored the programmatic reports for the program. The Enterprise Community grants should have been included in Michigan's annual "Single State Audits" which includes all of the federal funding received and used by each state The State must comply with the requirements listed i the Memorandum of Agreement as well as those listed in the Terms and Conditions of the EZ/EC SSBG grants awarded on December 21, 1994. |
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Sun Jul 17, 2016 7:59 pm |
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untanglingwebs
El Supremo
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The Office of Community Services (OCS) is the lead agency i the U.S. Department of Health and Human Services for community based human development services. This agency also administers the Social services Block Grant project grants.The close out of the FAEC was to start no later than December 21, 2004 and be completed no later than June 21, 2005. When there is a legitimate need to extend the grant project period, OCS may extend the grant. The FAEC was allowed to extend their grant period.
The Flint Area Enterprise Community established their Revolving Loan Fund Grants Standard Terms and Conditions in March of 2000. Page 8, Section L deals with "conflicts of Interest".
1."The Recipient shall not make RLF funds available to a business entity if the owner of such entity or any owner in such entity is related by blood, marriage, law or business arrangement to the Recipient or an employee of the Recipient or any member of the Recipient's Board of Directors, any member of the FAEC Board of Directors or a member of any other Board which advises, approves, recommends or otherwise participates in decisions cocernng loans or th use og grant funds. |
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Sun Jul 17, 2016 8:23 pm |
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