Apartment project loans cost Toledo $950,000

12/18/2001

Toledo city taxpayers paid about $950,000 this year and late last year on loans that were the primary obligation of developers of three city apartment projects: The Hillcrest, Museum Place, and the Commodore Perry.

The Finkbeiner administration disclosed the payments yesterday.

City officials said the three projects are not filling up as quickly as hoped and have experienced cash flow shortages. As a result, the city stepped in to pay the general obligation bonds on the projects.

In a written statement, Mayor Carty Finkbeiner said: “To meet its fiduciary responsibility, the city loaned money. They are loans, not grants. They must be repaid to the city of Toledo.”

The majority of the payments were made to subsidize the Commodore Perry, 505 Jefferson Ave., and Museum Place, 2330 Monroe St. and 1825 Collingwood Blvd.

The city paid about $625,000 on behalf of the Commodore Perry and about $273,000 for Museum Place, while the Hillcrest, 241 16th St., benefited by payments totaling about $53,000, according to figures provided by Ted Jones, the city's acting housing commissioner.

Mr. Finkbeiner is “really disappointed in the failure of the developers of the Commodore Perry and Museum Place,” Paulette Huber, the mayor's spokeswoman, said.

The developers, Oliver and William Hirt, co-owners of the Smallridge Co., could not be reached yesterday for comment.

Mr. Jones said repayment of the Hillcrest debt has been promised by the end of the year.

“These were the first housing projects in or near downtown. Those are the riskiest ventures,” Mr. Jones said. Subsequent privately developed projects were made possible because of the those investments, he said.

Mr. Jones said the Hirts are no longer involved in Museum Place.

The expansion of downtown living opportunities has been a hallmark of the Finkbeiner administration, which will conclude Dec. 31 when the last of Mr. Finkbeiner's two terms as mayor ends.

City council leaders said they are concerned about the payments and about the lack of notification from Mr. Finkbeiner.

City council requested details on the loan payments two weeks ago but had received no official response from the mayor's office as of yesterday afternoon, council President Peter Ujvagi said.

He said council's concern was sparked by a report from the administration in late November indicating the three projects were “stabilizing,” a term that suggested financial problems.

The projects involved are:

Commodore Perry - Bonds for $4 million and $3.5 million, were issued March 5, 1998. Debt service for this year, with half due June 1 and half due Dec. 1, totaled $230,737 on the first loan and $243,885 on the second loan. Building occupancy was 96 percent, with 150 of 156 units leased.

Hillcrest - A bond for $4 million was issued July 17, 1998. Debt service payments due in 2001 were $228,677.50. Building occupancy was 75 percent, with 80 of the 106 units leased.

Museum Place - A bond for $4.425 million was issued July 15, 1995. The 2001 payments due were $228,677. Building occupancy was 75 percent, with 49 of 65 units leased.

“Why didn't the administration, as these obligations came up, inform council?” Mr. Ujvagi asked.

Mr. Ujvagi said the city knew the general obligation bonds were issued with the full faith and credit of the city behind them. But he said if the developers aren't earning enough to make the required payments, the city should review the management of the projects to make them self-sustaining.

Matt Meier, project manager for the Alexander Co., of Madison, Wis., which owns the Hillcrest, confirmed that the city has made payments on the debt.

“It's taking some time for the downtown market to absorb the units,” Mr. Meier said. “We're confident the market will catch up and absorption will be realized.”

He said the agreement with the city allows the city to assume the debt if cash flow does not generate enough money to make the payments. He said the partnership ultimately is responsible for the entire debt.

A fourth city-backed project, the Lasalle Apartments, 513 Adams St., was developed with $7.47 million in general obligation bonds. The building is described as “stable,” with all 131 units leased.