City Wants Debt Paid
While Warren Hospitality Associates left its partnership on the proposed downtown convention center project with the City of Warren last year, it doesn’t mean the developer still doesn’t owe the city a lot of money – $50,000, according to the city.
In 2009, the City of Warren received a $50,000 grant from the state Department of Community and Economic Development’s Community Action Team (CAT) Predevelopment Grant to Loan Program.
In September of that year, the City of Warren entered into a contract, obtained by the Times Observer on Wednesday through a Right-to-Know request, with Warren Hospitality Associates, the owner of the former Loranger building on Clark Street where plans were in place for “the construction and development of a 74-room hotel and convention center,” according to the contract.
The contract explains that the city “is desirous of having the aforesaid site redeveloped and is supportive of the ASSOCIATE’S plans for such redevelopment and of the Project itself” and agreed to transfer the $50,000 obtained through the CAT Predevelopment program “from DCED to ASSOCIATES for the payment of eligible project costs.”
The DCED program requirements, however, required that the money be loaned to the entity rather than given via a grant. So the city entered into a contract that included a 10-year repayment plan with monthly payments set at $506.23 and 4 percent interest.
But Warren Hospitality has yet to pay.
City Solicitor Andrea Stapleford has informed council that, “Two demand letters have been sent to try to get payments to start.”
Council unanimously authorized Stapleford to commence with legal action in an attempt to recoup funds if payments do not commence within 30 days of the sending date of the last letter.
At their meeting last week, council members queried staff about the loan.
Councilman Sam Harvey asked what the purpose of the loan was. “I think it was development,” City Manager Nancy Freenock said.
Harvey then asked why city government would make a loan to a private corporation.
Councilman John Lewis said payment was deferred for a specific period of time, although there is nothing in the original resolution that indicated such. But it also doesn’t specify a start date for the payments, although a loan paydown chart was included.
Harvey asked if the state would come back and request the $50,000 if payment was not received.
“No, not that we’re aware of,” City Planner David Hildebrand said. “The grant was closed out by the state.”
But who is actually at the head of Warren Hospitality Associates is less than clear.
For the city, the contract was signed by then-City Manager James Nelles and Mayor Mark Phillips.
Robert Yoder signed the $50,000 loan contract for Warren Hospitality.
But in October 2011, after Warren Hospitality Associates filed for bankruptcy under Chapter 11, Tim King of Warren Development Group said his group’s effort to acquire Warren Hospitality, not the debt, drove the filing. “It’s an arranged acquisition through a Chapter 11 process,” King said.
King had been talking publicly about Warren Development taking over the downtown development from Yoder since April 2010. However, it is unclear whether the transaction actually took place.
“The new owners of Warren Hospitality Associates will be Warren Development Group,” King said at the time.
The city owns property that was to be part of the hotel and convention center and has a ground lease with Warren Hospitality Associates that expires in 2038.
While the site is leased to Warren Hospitality, that group isn’t the original signator.
The original lease agreement for the site was signed by Phillips, on behalf of the city, and Lee Patterson, on behalf of the Pennsylvania Alliance for Cooperative Innovation.
At the time, Patterson was president of Pennsylvania Alliance. Witnessing Patterson’s signature was then-Pennsylvania Alliance Vice President Tim King.
The lease outlines a $1 per year payment for maintenance of the agreement from Pennsylvania Alliance to the city. In addition, according to the lease, “…the company (Pennsylvania Alliance) agrees to perform or cause to be performed the obligations as set forth in Article V (of the lease),” and, “the land and the facilities shall be used only for the permitted use.”
Article V of the lease agreement stipulates that the developer “use its best efforts” to design, construct and otherwise develop the property on or before Dec. 31, 2011. To date, virtually nothing has been done to convert the property from an industrial site to a hotel-conference center.
The last communication from King, in December of last year, was that he was “no longer participating on the Warren-based projects and can offer you no information or details.”