PROVIDENCE, RI (WPRI) – The city prepares to write off more than $1.5 million in taxpayer-funded economic advancement loans to companies that have actually failed in recent years, part of its ongoing effort to clean up the troubled Providence Economic Advancement Collaboration (PEDP).
The PEDP board voted unanimously Wednesday to writecross out 22 loans, clearing $1.57 million in bad debt from its books that dates back to 2008. The city still prepares to contact the US Department of Housing and Urban Development (HUD) to ensure it is abiding by federal standards, according to Don Gralnek, who heads up the city’s redevelopment company.
“Nothing in life is complimentary and this was federal money at one point,” Gralnek told the board.
- See: The list of loan write-offs
The board also voted to ramp up its collection efforts on another $1.8 million in loans, consisting of a $69,000 loan to the former Scoreboard Restaurant on Chalkstone Ave, which hasn’t made a payment to the city given that 2006. At least three companies that owe the city money are still open, and authorities said they would seek payment plans that would not force the companies to close.
The PEDP functions as an arm of the city’s planning department, providing low-interest federally funded loans to small companies that have been turned down by standard loan providers. But the program has actually come under fire from HUD in currentrecently for a lack of oversight over the loans and a high default rate in its profile.
Last August the city paid back HUD $1.92 million to cover a variety of loans and other expenditures HUD ruled never ever ought to have been authorized, including $618,000 for dozens of purchases that the PEDP made between 2005 and 2011. The bulk of the cashthe cash PEDP was required to repay – more than $485,000 – initially likelied to various marketing, advertising or company advancement consultants during David Cicilline’s period as mayor between 2003 and 2010.
HUD crackedpunished the PEDP start in 2011, requiring then-Mayor Angel Taveras to make numerous modifications to the way PEDP issued loans. The 15-member PEDP board is now required to authorize all loans. Formerly, personnel members were allowed to sign off on loans of up to $75,000 without approval from the board.
The Elorza administration is still working with HUD to “tidy up the impressive PEDP loan portfolio,” according to Rhonda Siciliano, a spokesperson for HUD. She stated the firm is awaiting the city to “provide documentation to us to figure out which of those impressive PEDP loans fulfilled a national goal for task creation.
“The city will be offering HUD with a plan that will include timelines on how we are likelying to move forward through this next step of the procedure to get things back on track,” she stated.
Wednesday’s vote marks the 2nd time in three years the city has actually concurredconsented to compose off loans made by the PEDP. In 2012, the board agreedaccepted forgive 29 loans worth $2.1 million. Brett Smiley, the city’s chief operating officer and chairman of the PEDP board, said the Elorza administration desires to “begin with a clean slate” when it comes the PEDP’s $16-million loan portfolio.
The biggest write-off is for $213,000 for the Heritage Harbor Museum Corporation, a job that protected a $313,000 city loan in 2010 as part of an effort to protect millions of dollars in historic tax credits to develop a museum, but the project never pertained to fulfillment. In February, the board concurredaccepted accept $100,000 and offer up a lien on the equipment in order to assist the proposed $220-million downtown nursing school move forward.
Fourteen of the loans being composed off were for businesses moneyed through the city’s Development Financial investment Program (IIP), which introduced in 2011 as a way to offer early-stage financing for start-up business. The businesses each got $50,000 and the city got an equity stake in those business. (6 other IIP loan recipients have currently been converted to an equity stake for the city and 14 others remain active.)
“The expectation going in was the some of the business would be successful and some would not be,” Smiley stated.
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Dan McGowan (firstname.lastname@example.org) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan