Feds Order Ford City to Pay Entire Amount
by David Croyle
Ford City has been served notice it has to come up with $581,000 to repay the Economic Development Administration (EDA).
In a letter dated August 13 to Mayor Marc Mantini, Council President Kathy Bartuccio, and Borough Manager Eden Ratliff, the EDA ruled that a request for reconsideration of the payment was denied, stating that the Borough did not facilitate a resolution.
History
The EDA gave a Financial Assistance Award of $581,000 for Phase I site improvements to support the planned Heritage and Technology Park. The park was originally an 8.791-acre piece of land between Second Avenue and the Allegheny River that housed the former Shop 1 and 2 buildings of the PPG complex. The property was conveyed to the Middle Armstrong County Area Development Organization Inc. (MACADO). MACADO deeded the property to Ford City Borough on August 27, 1999.
An award of $581,000 was approved by the EDA on September 28, 2000 and was granted to the Greater Ford City Community Development Corporation (CDC) and the Borough of Ford City.
On July 30, 2004, the bank granted a Commercial Mortgage Loan to the Greater Ford City Community Development Corporation (CDC) for $1 million carrying an interest rate of 6.750%. At the same time, it also granted a Line of Credit for $330,000. The CDC, at that time, was managing the borough-owned property. The original loan documents were signed by the 2004 CDC president Steven Kozuch and treasurer Homer Pendleton. As collateral for the loan, the Borough agreed to secure the loan with the property, although it was not in control of the money from the loan.
The CDC was able to attract manufacturing firms Caracal and OEM Shades to the park. Caracal was paying approximately $10,000 per month and OEM Shades was paying $12,000 per month. However, Caracal filed for bankruptcy and pulled out leaving OEM Shades as the only tenant.
The CDC filed Chapter 7 bankruptcy in federal court on Thursday, September 18, 2008. The filing came only days after federal authorities seized records from CDC office and the homes of current and past board members.
At the time of the bankruptcy filing, the CDC was in default of its mortgage payments to F&M Bank. The bank notified OEM Shades to make lease payments directly to the bank. The amount of the loan payment was $14,800. The Borough was not able to make up the difference of $3,000 per month.
As of October 20, 2009, the amount still owed on the $1 million loan was $783,362.59. The amount on the line of credit was $223,520.60. Both loans total $1,006,883.19. The bank foreclosed and took possession of the property. The Borough did not fight the foreclosure, and the property was eventually sold by the bank to BelleFlex Technologies.
The EDA Saga
Since Ford City no longer was in possession of the property for which federal monies were given, Ford City was now left to repay the grant of $581,000. In the eyes of the EDA, Ford City had failed to protect the right, title, and federal interest in the former PPG foundry site and was in default of the terms and conditions of the grant.
EDA Regional Director Willie Taylor offered Ford City Borough Council President Kathy Bartuccio a lower payment due to the Borough’s economic hardship.
“Based upon the original grant award of $581,000, and taking into consideration the number of years that the Borough of Ford City maintained compliance with the grant award, EDA will agree to accept the sum of ($116,200) sufficient and adequate consideration to extinguish the grant obligation,” Taylor wrote in an October 2014 letter. If Ford City Borough Council would have made the first of three annual payments of less than $39,000 by the end of the day, a full release from the terms and conditions of the initial grant award would be applicable, according to the letter by Taylor.
Payments would have been made during the next three years – all due on Tax Day.
However, by March 2015, that agreement was not reached with Taylor, according to communication from EDA Philadelphia Region Interim Director Paul Matyskiela to Senator Toomey.
“EDA extended every opportunity to the Borough to resolve their obligation in a fashion that is fair to it and to the American taxpayers. However…they failed to act to accept EDA’s offer to accept a reduced sum…,” Mayskiela wrote in a letter. The matter was then to be directed to the federal Treasury Department for collection. Ford City requested the EDA to reconsider its determination.
Current Status
In the August 13, 2015 letter, Interim Regional Director Tonya Williams wrote that Ford City did not provide any new facts or information for the EDA to reconsider. “Further, no compromise offer has been made to facilitate a resolution nor, as we had hoped, to renew the $116,000 offer previously discussed. Therefore, the EDA has not alternative but to disallow all EDA project costs and establish a debt with the United State Treasury against the Borough for the full amount owed (of) $581,000,” Williams wrote.
“Please note, a reduced debt amount or forgiving the debt in its entirety are not viable options,” Williams concluded.
Ford City now has 10 days to set up a Repayment Agreement.
Since Council members just received notification today, August 14, they declined comment until they had time to consider the matter. However, Borough Vice-President Jerry Miklos had concerns during an interview in November 2013.
“It burns me to think that we’re struggling financially now (but) if we get hammered with this kind of debt payback, is that going to put the borough into bankruptcy? How are we going to repay that?,” Miklos said.
Ford City is now liable for repayment of the grant procured by former Congressman John P. Murtha after the building went foreclosure to satisfy liens against the property in 2009.
Ford City, Local News | David Croyle August 14, 2015
By mad-2010, August 14, 2015 @ 8:14 PM
Hate to hear this. When you play with fire sometimes you get burnt. Should have taken the 39,000.00 3 year deal! Oh No!! Mr. Bill, What Now! Some body is more than backwards. WOW!
By tellmethetruth, August 14, 2015 @ 9:06 PM
This paper has done its homework. This debt could have been avoided in about ten different ways. It’s a sad truth now but it certainly won’t bankrupt the Borough. The facts speak louder than any one person.
By sbmworker, August 18, 2015 @ 9:50 PM
Why are we paying Eden tens of thousands of dollars? He screwed us over as well as Jerry and his puppets! Eden needs to go! This council needs to go! Sickening! What will taxes be next year?
By Just sayin, August 19, 2015 @ 12:17 AM
The sky is falling…
By blutoblutarsky, August 19, 2015 @ 7:40 AM
The salt ordeal, the EDA ordeal… what’s next for this crew?
By savvynewshound, August 19, 2015 @ 11:18 AM
While I think this was a terrible mistake by the current council to not take the $.20 on the dollar buyout, let’s not forget the council at the time that allowed this property to go into foreclosure. They put us into this mess.
I give Eden credit for being on the “Talk of the Town” last night. He stepped up and answered some difficult questions from some callers that were not very educated on the situation other than just seeing the big number owed.
We are all aware of the problem we now have. Let’s try to come up with some solutions…