EagleTribune.com, North Andover, MA

December 3, 2012

Condo group: City reneged on free loan

Council to hear grievance tonight

By Shawn Regan
sregan@eagletribune.com

---- — HAVERHILL — A Wingate Street condominium association says its members and other homeowners and businesses were deceived about a city program to improve the exterior appearance of downtown buildings with free loans.

Tony Feliu, trustee of the Wingate Condominium Association, said city officials promised the association a $25,000 loan for facade improvements that it would not have to repay as long as ownership of the property did not change for 10 years.

A few months after offering the deal, however, Feliu said the city changed the terms of the program to one in which the association would have to repay not only the $25,000 principal but also 1 percent interest over 10 years.

“We were victims of a bait-and-switch deception by city officials,” said Feliu, who is bringing his grievance to City Council tonight at 7 p.m. at City Hall.

Feliu also claims other homeowner groups and downtown businesses were similarly misled by the city about the facade program, including Potter Place Condo Association on Washington Street and the nearby Hans Garden restaurant.

Economic Development Director William Pillsbury does not dispute the association was initially told it would not have to repay the loan. However, Pillsbury said that information, which was provided in what he called “promotional material” on the program and by his staff, was erroneous.

“It was a mistake and we regret it and I’ve apologized to Mr. Feliu,” Pillsbury said. “But we have to be consistent in how we use taxpayer money. As soon as I saw what they were expecting, I said we can’t do this. They never received anything in writing that it would be a free loan. Their contract says they have to pay it back at 1 percent interest over 10 years. We thought that was a pretty good deal.”

Pillsbury said the federally-subsidized facade loan program is new and that the Wingate Street condo association is the second group to use it. He said the first business to use it, Bannon’s Spa on Winter Street, paid back a comparable loan for exterior building improvements.

“Imagine how (Bannon’s) would feel if we gave someone a free loan after they just paid theirs back,” Pillsbury said. “And when we get the money back, that’s also how we do more loans and improve more buildings.”

Feliu said his association was told that as long as the property was maintained and ownership did not change, the loan would be forgiven. For costs above the $25,000 limit of the program, participants were told to secure ordinary business loans through local banks, he said.

Feliu said the association applied for the program last spring and was accepted. He said the association took out a commercial loan to secure more funds.

There were several delays in securing the $25,000 and the association eventually had to authorize its masonry contractor to begin work before the association received any money from the facade program, Feliu said. There are 36 residential units and six commercial units in the building.

“This pushed our finances to the limit — a risk we thought was acceptable considering we expected the money to be forthcoming,” Feliu said in a letter to City Council on the dispute. “June and July passed without action from the city. In August ... we learned the city had no intention of fulfilling its promise of a depreciating loan.”

“In mid September, after seven months of applications, telephone calls and e-mails, a contract was given to us. Ten years, one percent (interest), no depreciation — take it or leave it,” Feliu wrote. “The trustees, representing the interest of all unit owners, do not understand what happened. This is not how local government should work.”

Feliu said Bank of New of New England, which the city identified as a partner in the facade program, was also surprised the terms of the program were changed.

“They (the bank) stand to lose business if not credibility for being an unwitting participant,” Feliu said.

Feliu said the condominium owners want the council to intervene and urge Mayor James Fiorentini to fulfill the original terms of the loan.

“The trustees believe that if a vendor of the city decided not to fulfill the terms of a contract, the city would hold them to task,” Feliu said in his letter to councilors. “As residents and taxpayers, we expect no less from the government sector than government expects of the private sector ... The trustees find this a matter of trust and government integrity.”