Ownership is sometimes not necessary to pick up the tab - and that is the case with a $50,000 payment authorized Tuesday by the Dunkirk Common Council.
In passing Resolution 65-2013, council authorized $50,000 be paid from city funds on the loan the Dunkirk Local Development Corporation took out when it purchased the former harborfront Bertges property that sits between Demetri's Restaurant and the former Stefan's Marina. Prior to the vote, it was made clear the city did not own the property yet but was making the payment so the DLDC would not face foreclosure.
Development Director Steve Neratko provided some history prior to the vote, stating it was a Community Development Block Grant project going back a few years and that CDBG funds paid the majority of the costs. He added making the payment "is practically our only choice," since the plan had been to spend CDBG funds again this year.
OBSERVER Photo by Gib Snyder
Dunkirk Development Director Steve Neratko provided Common Council with information about the former Bertges property and how Community Development Block Grant funding played a role in its purchase and the current cash crunch for the Dunkirk Local Development Corporation.
"When we were informed that wasn't going to be a possibility going forward, we started looking into other options and really, this is the only one that really made any sense. The worst-case scenario if we didn't make this payment would be that the DLDC fails to meet its financial obligations, they could lose the property. At that point, if the property isn't in the hands of the DLDC or the city and the project is not going forward, CDBG/HUD could ask for those funds back," Neratko explained.
"So not only could we lose the property, but we could lose those funds the city has already put into this project, which is $300,000-400,000. It really is just to continue the project and to make the best of the situation, this is of utmost importance," Neratko added.
City Treasurer Mark Woods added the city's credit rating could suffer.
"Even though the DLDC is not under the direct operation of the city government, it is considered a component of the city government and that could, and most likely would, have a bad reflection on the city's credit rating. ... We enjoy very, very, low financing interest rates on any of the short-term borrowing that we've done. That could have a bad reflection on that low rate."
Councilwoman Stacy Szukala said there were concerns on how the city got into the situation and added "I think that we've talked amongst all of us for hours on end in the last week."
She added she had planned on voting no but changed her mind.
"We only have a handful of select properties on the waterfront that we can develop. So knowing that that could happen and hurt the city's credit I will be supporting this resolution," she continued. "But I also want to say for the record that I think that the terms that we were given for this loan, this whole piece of property, did not protect the city's best interests at all."
Councilman Adelino Gonzalez provided the lone no and explained why prior to voting.
"I think the price is going to be way too much and for us to be putting more money into bad money, I will vote against it," he said.
In response to a question from Councilman Michael Michalski, Neratko stated the appraisal on the property after it was purchased put the value at $250,000, well below the 2010 purchase price of $525,000. That created a problem.
"In talking with HUD they stated that since we've already put $250,000 into the payments on the property, plus funds above and beyond that, that they are not interested in any of their funds being utilized further on further payments on the property," Neratko explained, adding that lead to a search for funds and the resolution under consideration.
Neratko also said any proceeds of a sale of the property would be a subject for HUD review and likely go to CDBG use as the money had originally come from CDBG funds. Dolce said the eventual transfer of the property from the DLDC to the city should result in more beneficial terms for the city.
Councilwoman-at-Large Stephanie Kiyak read a prepared statement prior to the vote, saying the assessed value at the time of the $525,000 purchase was estimated at $361,000, according to the November 2012 audit report from the state comptroller's office.
"As of June 2012, $300,000 in additional payments were made, $29,000 was spent to demolish the building, and another $148,145 was spent to pave the lot," she stated, adding the DEC cleanup might cost the city $200,000. "We can all question what the prior administration and the DLDC Board at that time were thinking when they decided to acquire this property, but in the end it doesn't change the facts we are facing today. We either lose the tremendous investment that has already gone into this property to foreclosure by not transferring these funds, or continue making the payments with the hope that this site will one day be purchased by a developer who shares a common vision with the community.
"These are our only options - keep the property, or allow the Bertges family to take the property back."
After the 4-1 vote, Dolce said it was not the city's intent to be in the real estate business.
"We have an obligation and we need to meet that obligation. This was our best option and once the site is cleaned up we'll ramp up our efforts to market the site and hopefully find the developer before the need to transfer the property is done," he explained. "There's a possibility we might not even need to transfer it."
Dolce was asked how much NRG's future uncertainty affects harborfront development.
"Marketing is tough as it is, but I'm sure there's some additional concerns with that being the unknown. So it's just another one of those things where we have to work through it," he replied. "Once the DEC completes the cleanup on the Bertges site, I think that will be what feeds our marketing of it, knowing that it's a commercially clean site."
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