Investigation: $2.8 Million Still Past Due on PEDP Loans
Wednesday, October 16, 2013
According to documents provided by the city to GoLocal, of 136 current loans with a total principle balance of $16.5 million, more than one-third -- 48 in total -- are more than 121 days past due.
The PEDP had voted to write off $2.1 million on loan debt in June 2012, but financial problems continue to persist as the city -- and its federal oversight agency -- determine how to proceed.
See Timeline of PEDP Controversies BELOW
"The program should be eliminated. The personnel to find good borrowers, to underwrite the loans, monitor the loans, take corrective action quickly and make loan collections does not exist," said Mazze. "The best oversight is to bring in individuals with banking experience who understand how small businesses operate. Keep political people away from this process."
Loan Program Evaluation Continues
PEDP, which has come under close scrutiny locally as well as nationally for both questionable and delinquent loans, was placed under HUD oversight last fall, as loan fundings comes in part from Community Development Block Grants, and PEDP voted earlier this year to change its by-laws for greater oversight of the loan-granting process.
"Much of the past due monies are from loans where borrowers have gone bankrupt, or are in bankruptcy and/or do not have the funds to pay down the loans. I suspect many of these loans were poorly underwritten and the borrowers, once the funds were distributed, had no cash flow to pay the borrowed amounts back," said Mazze of the beleaguered program. "This is not unusual when loans are given to politically connected individuals/businesses with less than good business records."
Mazze thought that the city should be out of the business of micro-lending -- altogether.
"Providence's Economic Development Office should direct small businesses needing financing to banks and other finance service firms that have experience in dealing in this market. There are a number of financial institutions that work with the SBA on SBA lending programs," said Mazze. "There are a number of federal agencies that provide grants to small businesses. As we have learned. city and state government are not banks for businesses of any size. Leave lending to the private sector. They understand the risks."
Potential for Future of PEDP?
Aponte touched upon the nature of PEDP programs -- and collections. "While some loan programs were always intended to be converted to grants, others were never intended to become write-offs, which is what the City Council is in the process of looking at," he said.
"There are some transactions -- the lead program, for instance, if you get a loan, it's understood by parties that it becomes a grant, closing costs -- it's understood that it becomes a grant," said Aponte.
"The ones the council is seeking to review are the ones that were never intended to become grants," said Aponte. "My understanding though is that some of those [outstanding loans] out there, some of that may be uncollectible debt.
Still, Aponte thought that the program could be structured in a way that could ultimately be effective.
"I think it's a good program, but it could be better targeted to particular sectors," said Aponte. "It doesn't seem to me that a lot of analysis as to where the lending was going."
In addition, moving forward, Aponte thought that the city should be working in tandem with the private sector to provide small business support.
"The other part that's been talked about but not pursued -- on all those loans, PEDP is their only skin in the game," said Aponte. "One of the objectives should be that the PEDP dollars not be the only dollars, but find matching dollars in local banks, that would allow for the program to be more robust."
The Providence Economic Development Partnership (PEDP) came under fire -- and a federal investigation -- after more than a dozen GoLocalProv stories uncovered millions of dollars in delinquent loans, unauthorized agency spending and questionable deals
Below is a timeline of GoLocal PEDP stories going back to October 2011 when GoLocal first reported that more than a quarter of the taxpayer-funded loans issued through the program were at least 90 days past due.
October 24, 2011
The Providence Economic Development Partnership (PEDP), an initiative that includes 16 small business owners or politicians and is chaired by Mayor Angel Taveras, is currently stuck with a tab of $3,358,637.67 in delinquent loans, according to Joshua Teverow, the lawyer who represents the PEDP.
October 25, 2011
The South Providence recycling company that is more than 90 days past-due on a $410,000 loan from the Providence Economic Development Partnership (PEDP) also received a $300,000 loan from the Rhode Island Economic Development Corporation’s Small Business Loan Fund, records show.
October 26, 2011
The Bank of America Skating Center has come to be a landmark in downtown Providence, but a former Chairman of the Review Commission is saying taxpayers were misled about the cost of the rink by the Buddy Cianci administration and then left on the hook when the city converted a Providence Economic Development Partnership (PEDP) loan into a grant.
October 28, 2011
Following two GoLocalProv reports this week about the number of past-due Providence Economic Development Partnership (PEDP) loans and the decision to convert a loan for the Bank of America Skating Center to a grant, City Councilman David Salvatore is calling for greater City Council oversight of the PEDP loan program.
March 7, 2012
The South Side bar that was recently dealt an 11 day suspension of its liquor license after a 19-year-old male was shot in the establishment’s parking lot is also more than 2,000 days late on a taxpayer-funded loan from the city of Providence, GoLocalProv has learned.
June 26, 2012
The Providence Economic Development Partnership (PEDP) last week voted to write off 29 taxpayer-backed loans for small businesses, leaving the capital city on the hook for $2,171,125.66, GoLocalProv has learned.
All but seven of those loans were more than 1,000 days past due and one –a $60,660 loan for Danal, Inc. issued in 1996— was 4,799 days late as of last week.
July 19. 2012
The report, issued by the U.S. Department of Housing and Urban Development (HUD), analyzed ten years of the Providence Economic Development Partnership’s (PEDP) finances and found that the program had little oversight over funding recipients, failed to meet requirements for financial management standards and displayed questionable use of federal funds.
August 10, 2012
The agency that oversees Providence’s small business loan fund spent nearly $25,000 of federal funds on lunches for board members between 2006 and 2011, according to a list of expenses provided to GoLocalProv.
August 13, 2012
Council members were informed prior to that May meeting, the agency was not required to provide loan default records or other information related to loans being doled out on the city’s behalf. The PEDP was a separate body, Councilors were told, with its own board that counted the Mayor as its chairman.
August 14, 2012
A prominent Democratic social club in Providence’s Silver Lake neighborhood was a recipient of a taxpayer-funded loan through the Providence Economic Development Partnership (PEDP), GoLocalProv has learned.
August 15, 2012
The taxpayer-funded loan program run by the city of Providence still had 18 loan recipients that were at least 500 days behind on their payments as of the end of July, according to an aging report obtained by GoLocalProv.
Collectively, the 18 recipients owe the city $1,083,563.18.
August 27, 2012
The man seen in an undercover video telling a campaign staffer for Congressional candidate Anthony Gemma that he could deliver mail ballot votes in exchange for $500 per week received a $103,000 taxpayer-funded loan for a restaurant from the city of Providence in 2004, GoLocalProv has learned.
August 30, 2012
The 66-year-old man who received a six-figure taxpayer-funded loan less than 20 months after volunteering on Congressman David Cicilline’s 2002 Mayoral campaign never repaid a dime on the loan, GoLocalProv has learned.
September 10, 2012
Seven businesses that received more than $500,000 in taxpayer-funded loans while Congressman David Cicilline was Mayor of Providence never repaid a dollar before the city wrote the loans off earlier this year, according to information obtained through a public records request.
October 1, 2012
The Providence Economic Development Partnership (PEDP) intentionally kept severely delinquent taxpayer-funded loans on the books so it wouldn’t have to repay the Department of Housing and Urban Development (HUD) based on its extraordinarily high default rate, the agency’s former executive director told board members during a meeting last year.
November 13, 2012
A failed custom wheel designer, a recycling company, a manufacturing business and a politically connected nightclub that never repaid hundreds of thousands of dollars in taxpayer-funded Providence Economic Development Partnership (PEDP) loans also failed to pay back nearly $1 million in state small business loans, according to the Rhode Island Economic Development Corporation (EDC).
Enjoy this post? Share it with others.
Commenting is not available in this channel entry.