Then things got complicated.
The IDA’s board decided to see how much the parking lot was worth — how much cash it had generated from parking fees from Old City Hall Associates, the group that manages Old City Hall. Those numbers simply weren’t available, several people close to the situation say.
“We didn’t know what the lot was worth because we couldn’t find out how much had been paid … for it,” says a former IDA member. This person, who spoke on condition of anonymity, says the board was being fiscally responsible: “We couldn’t sell it for $300,000 because it might be worth a lot more.”
So the board turned Trani down. Trani was so angry over the refusal that in one meeting, says one person who attended, he threatened to take over the parking lot through eminent domain. (Because VCU and the IDA are arms of government, that couldn’t happen.)
The situation continues to drag on. Last year the IDA paid about $100,000 in legal fees for an arbitrator to help with the dispute over the parking lot near Old City Hall. Old City Hall Associates and the IDA continue to negotiate over back rent. Meanwhile, Old City Hall Associates is negotiating to buy the lot.
As the parking-lot example shows, the IDA has problems with its books. There are other examples. Through internal documents and interviews Style has learned that:
The IDA wrote off more than $1 million in bad loans last year from programs intended to help businesses in distressed neighborhoods.
A dispute over $62,500 in apparently unpaid fees resulted in one IDA board member quitting briefly, while another threatened to seize the assets of a nonprofit group.
Questions are being raised about the close connections between board members and loans that records show were never repaid.
Recipients of low- or no-interest loans have in some cases gone years without paying back the loan — or contacting or being contacted by the IDA or the city.
The IDA says these and other problems are primarily the fallout from years of poor bookkeeping by the city finance department. One close associate of the board says that the authority spent “about a year” cleaning up the books after taking them over from the city in 2001.
The IDA’s defenders point out that the authority has done enormous good. It paid for a landmark study that supported the Canal Walk. It has bailed out the Farmers’ Market in Shockoe Bottom at least two times. It has provided important funding for scores of small businesses.
But in the past two years the IDA’s disagreements with City Hall have led to increasingly public tension, with finger-pointing on both sides.
“I’m concerned with the way the whole operation is being run,” says City Councilman Bill Johnson Jr., one of the IDA’s most outspoken critics. “Why are seven appointed people running a program totaling millions of dollars? That’s just unacceptable.”
The IDA is an independent authority that acts as a proxy for the city’s economic-development goals. Because municipalities are forbidden to make loans to some people but not others, IDAs do that job for them.
The IDA receives no money from the city budget; its income is derived from bond sales and fees. The IDA’s assets are worth $14.5 million including the AdvanTech business incubator it oversees, according to 2002 records. It earned $418,154 in fees last year, but had expenses totaling $1.1 million.
The Richmond IDA is overseen by a seven-member volunteer board appointed by City Council that typically includes experienced developers and well-connected people. IDA board members typically have full-time jobs. The authority has no staff other than an office manager. The board relies on managers hired by the IDA to manage the authority’s loan funds and other assets.
About 10 years ago, the IDA agreed to hire the city to manage its finances, at a charge of $100,000 a year. The city was supposed to track the IDA’s loans and fees, make sure payments were credited properly and ensure that paperwork was maintained.
IDA members say the work was unsatisfactory. “We basically never saw the books,” says one former member. “We asked and asked. But we had no idea what was going on.”
Other people close to the IDA say they believe many payments were not recorded or credited properly — so many that some members of the board essentially disavow the authority’s own books. “It was a huge mess,” says one IDA associate.
In a City Council meeting last week Council member Bill Pantele, a former IDA chairman, said the bookkeeping included “fairly obvious errors.”
Pantele refused to sign the 2000 financial report, saying he couldn’t guarantee its accuracy. That held up the year’s financial audit, which by state law is required every year. Accounting firm KPMG said it requires a signature before releasing the report. Last week, Pantele agreed to co-sign off on a report if city finance officials said they would sign it, too.
Disputes over the record-keeping are nothing new. In 2001, after years of complaints and headaches, say some current and former IDA board members, the board took the management responsibility away from the city finance department and hired the Richmond Economic Development Corp., an arm of the city economic-development department, to go through the books.
Now, in fact, some IDA board members say their records show that the city owes them about $600,000 in unpaid fees. Last summer, in a brief letter to City Manager Calvin Jamison, the board said it would not pay the $400,000 the city said the IDA owed it. Soon after, the IDA announced to the city that after going over its records, it had discovered that the city, in fact, owed the IDA about $1 million in unpaid fees from the past few decades. Jamison responded that because the IDA had never accepted fees until a few years ago, the city would not pay.
Loan Programs Criticized
Questions have also been raised about IDA’s loan programs intended to jumpstart development in low-income areas of the city.
Two programs, the Enterprise Zone Incentive Loan (EZIL, pronounced “easel”) and the Commercial Area Revitalization Effort (CARE) programs — make up the bulk of the authority’s $6.2 million in loans to businesses.
Some EZIL loans are “forgivable” — paid back with credits for increased tax payments. The CARE loans are to be paid back in cash. If the loan recipients go out of business, leave the city or fall behind on their payments (or on their record-keeping that shows how they are paying more taxes), the city can seize assets or demand repayment of the loans.
That hasn’t happened.
An IDA review of loans and delinquencies from Dec. 31, 2002 says $1.1 million in loans are at least 30 days delinquent. According to internal IDA documents from 2002, 23 businesses defaulted on $555,566 worth of EZIL loans. Another 17 businesses were recorded as delinquent on $716,726 worth of CARE loans, the documents say.
This year the Richmond Economic Development Corp., after reviewing the IDA’s books, recommended writing off $1 million out of a total of $6.6 million in loans, according to documents obtained by Style. Another $355,000 in EZIL loans were forgiven under the terms of the loan, IDA documents say.
Several of the low- or no-interest loans that went to businesses are raising eyebrows in the current heated environment.
In 1996, the IDA gave a $48,003, 3-percent interest EZIL loan to Charles City Medical, where current IDA chairman George M. Hartsfield was employed as an administrator. That loan was not repaid as of a March 2002 report that showed Charles City Medical owing the full amount of the loan and $7,944 in interest.
Hartsfield joined the IDA in 1997; he no longer works at Charles City Medical. Lerla Joseph, Charles City’s director, did not return several telephone messages requesting comment.
In 1999 and 2000, the IDA gave First Baptist Church of South Richmond run by Delegate Dwight Jones, D-Richmond, two low-interest CARE loans totaling $105,500 to develop 1416-1418 Hull St. As of Dec. 31, 2002, IDA records showed both loans as being delinquent; $90,500 of the loans hadn’t shown payment for 17 months.
Nonetheless, last month City Councilwoman Jacqueline M. “Jackie” Jackson, a member of First Baptist, nominated Tonya Scott, First Baptist’s development director, to join the IDA’s board. City Council appointed Scott to the board this month. A message left for Scott wasn’t returned.
History Museum Dispute
The IDA’s record-keeping woes have caused other troubles. Last year, the IDA discovered that for 10 years Jackson Place, a small museum of African-American history at Second and Marshall streets, apparently never paid the IDA the $6,250 a year it owed for spaces in a parking lot the IDA owned nearby.
IDA vice-chairman H. Louis Salomonsky attempted to negotiate the $62,500 in back fees. When negotiations broke down, however, Salomonsky threatened to seize the museum’s assets for repayment, say several people involved in the dispute. The museum contacted Richmond Renaissance for help.
The dispute became so heated that a couple of weeks ago Mayor Rudy McCollum Jr., who met with Richmond Renaissance and Jackson Place officials about the issue, told several people he was shocked by the level of anger he saw.
IDA board member Oliver R. Singleton quit the board as a result of the dispute, say three current and former board members. After pleas from Jack Berry, director of Richmond Renaissance, and John W. Bates III, an influential real-estate attorney with McGuire Woods, Singleton agreed to rejoin the board.
The dispute over the parking-lot payments still isn’t settled, say several people involved in negotiations.
Records in Question
Some of the businesses the IDA’s documents say are delinquent are out of business — Grace Place restaurant, for example, which is recorded as owing $3,500, has been closed for years.
Others say they’ve never been asked to provide payment or information.
“I’m absolutely sure I’m not in default,” says Doug Moore, owner of Moore’s Autobody & Paint Inc., which the IDA’s reports show as having defaulted on $50,000 in EZIL loans.
Virginia Binding Corp. is recorded as not paying anything on a $50,000 EZIL loan it took out almost eight years ago. “I’m surprised they’re showing our loan as being delinquent,” says Gary McDowell, owner of Virginia Binding.
McDowell adds that based on his experience with the city loan program he assumes the city’s records are muddled.
“Supposedly, you’re supposed to fill out a form saying how much more in taxes you’re paying and so on,” he says. “But of course they never give you any forms or send them out. … I’ve never been asked to produce any paperwork. They’ve never given me a statement or asked me to fill out a form or anything.”
McDowell says he’s sure his business is doing well enough to have the EZIL loan forgiven. And the loan did help him move his business to a larger building that employs more people, McDowell notes. “So in that sense, the program worked.”
