Lorain Development Corp- the revolving- evolving story!
UPDATE AND NOW THE FBI PROBE!!!!!
A further update: Lorain cuts the cord with Lorain Development Corp:
UPDATE: The President of the Lorain Development Corp states the Board view
A year ago April 15th, 2015 I wrote the post “Money for Old Rope – A Taxpayers Question”
I had once again been to a City Council Meeting and I didn’t like the report being given to City Council on a loan with regard to the Lorain Development Corporation
The exchange between council and Director Rangel can be found here- page three
“Unfortunately I remembered $100,000 dollars with much hoopla being given to Prime Industries. http://www.loraincounty.com/manufacturing/feature.shtml?f=12666
prime_industries and media success stories such as the Morning Journal article October 2010- ALL “SOUNDED” VERY PROMISING
Local customers include amusement park Cedar Point, which turns to Prime Industries for safety harnesses for its gravity-defying rides.
In addition to making new parts for Cedar Point, Prime Industries refurbishes safety harnesses after thousands of roller-coaster passengers have worn them out…..
… Other local customers include Invacare Corp., in Elyria; Bettcher Industries, in Florence Township; Nordson Corp., in Westlake; and Latanick Equipment Inc., in Huron. Prime Industries also makes parts for missiles built by Lockheed-Martin for use by U.S. armed forces in Iraq. With more than 500 customers, the company started as a division, called Advanced Foam and Plastics, of Kindt-Collins Co., based in Cleveland
The headline is a bit misleading( prospers???) because halfway through the article the history states:
Advanced Foam and Plastics was created to serve the foundry industry, but by 1984 it was known as Prime Design.
In 1997, Prime Design received $292,000 from Lorain to relocate here from Cleveland, creating 22 jobs.
A $100,000 loan from the city in 2000 helped expand, but by 2002 Prime Industries was up for sale
First, Rich and Joe Persico paid off the $292,000 loan from 1997, and then put up $145,000 of their own capital.
“Then” the city of Lorain loaned them $400,000 and a Warren bank also loaned them $400,000 in 2002 Prime Design became Prime Industries.
In May 2008, Lorain loaned the company $100,000 to gain new contracts. That is $600.000 by my calculations we have had some back in the employee income tax but still money for old rope imho.
The name of the department had changed from Community Development Dept (headed for decades by Sanford Prudoff) to Building Housing and Planning
In three decades under former director Sanford “Sandy” Prudoff, Community Development grew into a overly large department with too little accountability to city leaders and providing too little benefit to Lorain, Ritenauer noted…………..
Prudoff controlled the agenda of how to spend CDBG money in the city with the administration and council seemed to have little say about what projects the city should do or skip, Ritenauer said.
Those determinations were “completely opposite of chain of command and hierarchy,” Ritenauer said.
It appeared the department grew to maximize the salaries for administering federal CDBG money granted to Lorain, Ritenauer said.
30 years , missing paperwork, things getting lax, housekeeping by the way side, the paperwork is either non-existent or “lost”, not complete in some cases.And it appears certain developers( who shall remain nameless in case I am accused of chasing him out of town again) 😉 getting a great many trips to the ATM that was seemingly Lorain ? How many jobs have been created???
TRUST– the employee that his “boss” knows what he is doing and is aware of legal ramifications !
TRUST – by volunteer boards the items brought before them are “above-board!
TRUST – by the Administraton -their departments heads, hired for their expertise, know what they are doing and are working with one goal in mind to better the City of Lorain!
TRUST by a City Council they can act upon the advice of those department “leaders”.
One area breaks down in that circle of trust and the ripple effect finally hits the shore with a great crashing sound, as it did last night in City Council Chambers .This morning’s headlines read :
Lorain Council Rips into Business Loan report by Rick Payerchin – Morning Journal
and ” Lorain revolving loan program has $600,000 in write-offs- by Katie Nix”
As Mr. Mason stated, the issues with the revolving Loan fund came to him from the State Auditor
“I got an email from the state auditor who wanted to know why the city of Lorain had over $600,000 in loan write-offs,” department director Leon Mason said. “My response was that I didn’t know what he was talking about, and when he sent me the information, I was able to pinpoint some of the loans, but I did find some that were troubling, to say the least.”
Mason said one that stood out to him was a $250,000.01 loan to the South Shore Community Development Corporation.
South Shore took ownership of the St. Joseph facility in 1997 after St. Joseph Hospital merged with Lorain Community Hospital to create Community Health Partners. An $800,000 federal grant was used to get the building ready for its new tenants. Additional grants and loans were secured to bring it to its current condition.
The state has $1.4 million in loans invested in the community center, while the county and the city each have $700,000 in loans tied to the center. If South Shore files for bankruptcy, the state, county and city will be on the hook for those loans. Gilchrist said the city’s payments on its loan would be about $50,000 a year. Lorain is currently $1.3 million in the red.
After the loans are repaid by recipients, the money is intended to go back to another business.
Federal Funds have certain rules which must be adhered to and Lorain has to be stringent in following those rules- other wise we are in trouble.
Should Lorain have to pay back those monies in question then the General Fund takes a huge hit and we can’t afford even that one dollar hit!
Hopefully, the program changes, the rules are followed and the “iffy factor” becomes totally transparent.
Although, due to a possible investigation in the loan for South Shore Development Corporation,
not a lot was said ( under the Krasienko/ Gilchrist era) that money $250,000,and ONE dollar would give our General Fund a huge hit. Let us hope the Administration, Law Dept. and City Council will support each other on this and get to the very bottom of the “pot of gold- for some”
I remember under the Foltin Administration and Prudoff those “allowable ???” expenses paid to wine and dine the Shawnee and Capital One “tribe” initially, before I asked questions and then after??? well it was rolled over into a bond and I could no longer get the breakdown of all the monies spent but this country club of cash sure sent my red flags flying at the time- Dinner was literally on us!!!!!!
Lorain Development Corporation did respond to my post last April and it can be found here :
1)I prepare a loan write-up that provides a background of the project with financial information and the justification for approving the loan.
(2)Once I have completed, I provide this to the loan board for their review and approval.
We do this process just like bank’s credit teams do and have discussion and if everything is okay, loan approves the credit. They can also reject loan requests or modify them though these do not happen too often.
The loan board are various professionals in insurance, banking, law, small business owners, etc. who all live in, work in or own businesses in the City of Lorain. This board has been a self-appointing board since its inception and they are not appointed by administration or council. Board tries to keep a mix of professionals on board so it is not all bankers or attorneys but a mix. They are an all-volunteer board and most of these individuals have been on board from a few years to one person who has been on board since inception over 25 years ago.
Once the board approves the loan credit, all loans are submitted to Board of Control for approval as they will eventually sign for the loan.
Once board of control approves, we move to documentation of loan with all documents reviewed and approved by City’s Law Department. At that time, we also open a purchase order to commit money and submit check requests when we receive necessary documentation requesting funds.
Loans are derived from two sources, one through HUD http://portal.hud.gov/hudportal/HUD and the other through the Economic Development Administration.
You can find the PDF files of Director Mason’s report here:
Economic Development Final
LDC Conflict of Interest Policy
LDC Subrecipient Agreement
Portfolio Quality Report
EDA Title IX Plan
Entry filed under: a Cow -elle opinion, city of lorain, hell is other people, notorious opponents of exactitude. Tags: City of Lorain, local politics, Lorain, Lorain Development Corp, media, opinion, South Shore Development Corp, waste not want not.