Providence repays $1.9M for bad loans, improper expenses

City defends taxpayer funded grants that help renovate blighted areas.

PROVIDENCE, R.I. (WPRI) – The troubled taxpayer-funded loan program run by the city of Providence is finally turning the page after years of scrutiny from the federal government.

The city repaid $1.92 million in August to cover a slew of loans and other expenditures the U.S. Department of Housing and Urban Development (HUD) ruled never should have been authorized, according to HUD spokeswoman Rhonda Siciliano.

The payment came after HUD said the Providence Economic Development Partnership (PEDP) had to repay or recover about $1.2 million in ineligible loans issued before current Mayor Angel Taveras took office, as well as more than $528,000 in administrative and consultant fees from 2005 through 2011.

“The city worked closely with HUD to repay the funds owed without impacting the city budget,” Dawn Bergantino, a spokesman for Taveras, told Target 12. “HUD was repaid out of the city’s general fund with non-federal dollars, and the federal government increased the line of credit in the city’s Community Development Block Grant (CDBG) budget by the amount repaid.”

The PEDP functions as an arm of the city’s planning department, providing low-interest taxpayer-funded loans to small businesses that have been rejected by traditional lenders, but has come under fire from HUD in recent years for a lack of oversight over the program.

In May 2013, city officials agreed to reimburse HUD $618,000 for dozens of purchases – including a limo ride, two parking tickets and a gift for a sick employee – that the PEDP made between 2005 and 2011. The majority of the money PEDP was forced to repay – more than $485,000 – originally went to various marketing, advertising or business development consultants during Congressman David Cicilline’s tenure as mayor between 2003 and 2010.

Last December, HUD determined the city would also need to reimburse the federal government to cover a $422,000 loan to the nonprofit Providence Black Repertory and Bali Holdings LLC; a $70,000 loan to the nonprofit Perishable Theater; a $313,000 loan to preserve federal tax credits for the century-old Narragansett Electric Co. Dynamo House on South Street; and an $800,000 loan to preserve federal tax credits for the Olneyville Housing Corporation.

HUD said the city needed to repay another $154,180 for 13 smaller grants funded under the Innovation Providence Implementation Council, a program the federal agency determined was not eligible to receive PEDP funds.

While the city was able to recover the lost money from the Providence Black Repertory/Bali Holdings LLC loan thanks to a recent sale of its Westminster Street property, its $1.92-million payment in August covered the rest of the tab.

The PEDP’s loan portfolio currently has 133 loans worth $15.5 million, according to a Target 12 review of the agency’s aging reports. Of those loans, approximately 23% were at least 200 days past due as of Nov. 13. Twenty-six loans were at least 1,000 days past due.

The PEDP became something of a punching bag in the race for mayor earlier this summer, when City Council President Michael Solomon acknowledged that a project he was a partner on owed the city more than $400,000 from a loan issued more than 20 years ago.

Mayor-elect Jorge Elorza said he wants to “rethink” the PEDP, but indicated he hasn’t considered dissolving the agency, during a Friday taping of WPRI 12’s Newsmakers. Elorza said he wants the PEDP to play a role in pledge to provide more city contracts to businesses owned by women and minorities.

“We definitely need to rethink PEDP and come up with a way that the resources that we’re expending through PEDP and the loans that we’re giving out strategically fit in to our vision going forward for the city,” Elorza said. “It has to be about what kind of jobs can we create and what kind of businesses have the potential for growth.”

Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Twitter: @danmcgowan

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