Developer Can’t Pave Over Holes in City Loan Contract

A property south of the train tracks behind South Elm Street and the Cascade Saloon was sold in 2008 to what would become Greensboro Parking Group LLC for $1,050,000, with a $52,500 real estate commission, half of which was paid to “NAI”.

In February 2012, Greensboro’s City Council passed a resolution approving a $200,000 loan, $100,000 of which was to construct a parking lot that has been completed, and a second $100,000 for a companion restaurant to Worx. Current City Council members who voted for the loan include Nancy Hoffmann, Yvonne Johnson, Zack Matheny, Nancy Vaughan and Marikay Abuzuaiter.

The developer agreed to, and was required to comply with, specified contractual conditions including; “The second $100,000 of City loan funds will be invested in the last $100,000 of project improvements after confirmation that the developer equity and bank funds have been fully deployed into the project. Architect’s or engineer’s certification of work completed on the project and work remaining to be done will be provided to the City prior to the release of any City loan funds. Committed funds totaling $2,272,860... Capital investment must be complete and in-place by July 31, 2013. The parking lot and restaurant tenant, [Spice] Cantina, are required to create at least 4 new full-time positions [by] July 31, 2013. Developer must confirm that all funds inclusive of the tenant up-fit funds of $179,000 necessary to open the restaurant are available and ready to be invested in the business and present a signed lease ... that will own and operate [Spice] Cantina before the second $100,000 of City loan funds are disbursed. The second $100,000 will be used in the renovation and opening of the restaurant and will be reimbursed ... only after all work is substantially completed on the project. The second $100,000 of City loan funds will be invested in the last $100,000 of project improvements after ... bank funds have been fully deployed into the project. No advance payments shall be made.”

A member of the Momentum Group, whose principals including Downtown Greensboro Inc. (DGI) board member Nick Piornack, informed three City staff members last week that “75 or 80 percent” of the Cantina was complete. Yet the developers have submitted invoices, and received payments from the City, for all but $1,642.86 of the second $100,000. A guesstimate of the project’s progress appears to be far less than the 75 percent cited.

The Momentum Group has been in discussions with City Council member Nancy Hoffmann to develop a couple of properties Hoffmann recently purchased on Lewis Street, which would utilize the lot she voted to fund for patron parking. Personal guarantees were required from the investor group that included Piornack, whom Nancy Hoffmann nominated for the DGI board.

Previously, Hoffmann consented to allow a tenant to apply for a retail grant for her Elm Street building for electrical work, frame and sheet rock, and plumbing. In my view, the grant, which was funded by a Hoffmann Council vote that allocated monies to DGI, benefited her personal property. At a Council meeting, Hoffmann stated “No taxpayer money was spent on my behalf for the 302/304 South Elm building.”

It appears the developers have not deployed the agreed upon private monies before asking for the second $100,000 as required. The capital investment and jobs were not in place by the deadline, and the required lease was signed by Piornack, as managing partner of “Spice Cantina, LLC”, even though Piornack is a member of Greensboro Parking Group, LLC, which is listed as the landlord. The City declined further comment on whether the “up-fit funds of $179,000” for the restaurant were “available and ready to be invested”. Nancy Hoffmann did not reply for comment.

At an Economic Development Committee meeting on April 11, Marikay Abuzuaiter raised the issue of oversight on various loans, grants and incentives provided by the City, specifically citing the Greensboro Parking, LLC loan, and informed her colleagues that Momentum had not satisfied the requirements of the resolution passed by City Council. Abuzuaiter thinks there may be more unfulfilled, undisclosed contracts.

In December, 2013, the contract was amended by City staff without formally informing City Council, extending the “Time of Performance 7/31/2013, to 12/31/2013”. The document states “The City contact for all matters including request for payment and reporting under this agreement shall be Kathi Dubel. Dubel, like former City Manager Denise Turner Roth, served as a lobbyist for the Greensboro Partnership before working for the City.

The City appears to have extended a noncompliant contract after payments were made and obligations not produced, which now looks like it’s in default.

http://yesweekly.com/article-18090-developer-can%25E2%2580%2599t-pave-over-holes-in-city-loan-contract.html