Town must pay back urgent-needs loan in full

Published 5:20 am Tuesday, June 5, 2007

By Staff
Lawsuit fell short of cost to salvage Wynne View building
Staff Writer
The state Department of Commerce wants payment in full for an urgent-needs loan the Town of Belhaven received.
The town borrowed the money to salvage an economic development project and passed along the funds to the for-profit arm of the local economic boosters involved in the project.
Belhaven officials had hoped to settle the debt by repaying a quarter of the loan with the entirety of the lawsuit settlement awarded to the economic development group for the faulty construction of the Wynne View building.
The town borrowed $485,000 from the Community Development Block Grant program and passed on that loan to pay for repairs to the Wynne View building.
The settlement of $125,000 left a loan balance of $360,000.
In a letter dated May 3, 2007, Gloria Nance-Sims, director of the state’s Division of Community Assistance, writes that the town’s failure to pay the loan in full will cause the state to close out the project with a performance finding.
According to Belhaven’s Mayor Adam O’Neal, the finding “greatly affects the town’s ability to obtain grants.”
Don Hobbart, a lawyer with the Commerce Department, confirmed Monday that the state has closed out the emergency loan file on the Belhaven loan.
The town is obligated to pay off the balance of the loan, Hobbart said. “And until then, the town would not be eligible for Community Development Block Grant assistance.”
Hobbart added that “meaningful internal reforms and structural changes” would also satisfy the Division of Community Assistance, and the town could remove the finding against it by following those recommendations, which he said, were discussed at great length between the two entities.
He said he wasn’t made privy to those terms.
In Nance-Sims’ letter, she notes that the finding is due to the town’s handling of the loan, the town’s failure to properly protect and secure that loan once the town passed the funding on the Wynne View, the town’s failure to timely advise the DCA concerning the status of those funds and the town’s failure to monitor the status of those funds.
O’Neal has said that the developers involved in the Wynne View project have misled town residents and town officials.
The building is owned by the for-profit arm of the nonprofit Northeastern Beaufort County Economic Developers. Wynne View was built to provide the nonprofit group with a sustainable revenue source for other economic development projects in the area.
Wynne View was built with a nearly $1 million entrepreneurial empowerment grant. Due to faulty construction and a failing foundation, the building faced condemnation.
Charles Boyette, a founding member of NEBCED and president of the for-profit Wynne View Inc., made efforts to salvage the $1 million investment in the building. Then mayor of Belhaven, Boyette pitched to the Town Council that the town could intervene by obtaining an urgent-needs loan through the same state agency that funded the entrepreneurial grant.
The loan would be paid off, Boyette contended, once a settlement was reached between Wynne View and the engineer and architect who designed the building.
In March, the council unanimously approved a budget amendment that forwards the $125,000 Wynne View settlement to the Division of Community Assistance.
The DCA, a division of the Commerce Department, secured the $485,000 loan for the town to save the Wynne View building.
The state and town have been negotiating repayment “because of extenuating circumstances,” said Deborah Barnes in an earlier interview. Barnes is a public information officer with the Commerce Department.
O’Neal has maintained that the town should not have taken out a loan for a for-profit. He says Wynne View Inc. should come up with the balance and repay the loan.
At the Town Council meeting in December, Boyette — appointed to the council last year to fill an unexpired term — pitched to his counterparts that the Wynne View property be put on the market and any profit made from the sale of the building be reinvested to spur on other economic development projects in Belhaven.
According to Hobbart, that’s “not an option for the town.”
CDBG requirements state that if the government entity receiving CDBG assistance wishes to sell or dispose of that property and the intended purpose of the property changes, then the funding must be refunded to the state. That requirement is fixed for five years.
In theory, Hobbart said, the property could be sold if the building’s use isn’t changed.
More than a decade ago, construction on the Wynne View building began under the direction of NEBCED.
Wynne View was part of a three-pronged project meant to spur development and provide a sustainable source of income to the nonprofit group so that it could continue other economic projects in the northeast region of the county.
In 1997, NEBCED sought the assistance of another area booster when the project ran into financial difficulties. Community Developers of Beaufort-Hyde, also a nonprofit, teamed up with NEBCED on the Wynne View project, and the two entities established a jointly-owned for-profit corporation, Wynne View Inc.
Under the agreement of the two nonprofits, NEBCED would own 51 percent of the for-profit and CDBH would own the remaining 49 percent.