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Published: Friday, 1/28/2005

$900,000 U.S. grant for the city threatened

BY TOM TROY
BLADE STAFF WRITER

A $900,000 grant promised by the federal government more than six years ago to develop the North Cross Industrial Park in Toledo is still in escrow - and a critical federal audit is threatening to wipe it off the books.

The city's law department has appealed to the U.S. Economic Development Administration in Washington to reverse a recommendation by an agency audit that the grant be returned.

The auditor charged that the city improperly allowed the private developer of the North Cross project, a 150-acre park located northwest of Alexis Road and I-75, to determine the awarding of city contracts for water, sewer, and street construction in the industrial park

Law Director Barb Herring said the city is appealing the audit.

Mayor Jack Ford referred to the issue in his State of the City speech Tuesday night while citing bad city deals made in the former administration of then-Mayor Carty Finkbeiner.

"Even now we are fighting the federal government over $900,000 that was improperly spent on the North Cross deal," Mr. Ford said. "That $900,000 has been held in escrow for three years - we could really use it right now."

The money was intended for the city's capital improvements fund.

The city developed the former farmland with Perry Farms Inc. to relocate businesses that were uprooted to make way for the new Jeep assembly plant off Stickney Avenue.

The city paid for streets, storm drains, sanitary sewers, and waterlines in the public right of way, and Perry Farms marketed the land, with a price cap.

The park has been developed, and parcels are still available, according to Jim Perry, president of Perry Farms. He said three new Jeep suppliers are considering acquiring parcels.

Mr. Finkbeiner said last night that "the Feds knew that Mr. Perry was involved in this project from day one."

"We fought like the dickens with those federal guys because we knew the value of that North Cross to that Jeep site," Mr. Finkbeiner said.

Mr. Finkbeiner, who is considering a run for mayor in November, said Mr. Ford's reference to the North Cross deal in his State of the City speech was "political."

In 1998, the Economic Development Administration approved the $900,000 grant as a partial reimbursement of the $2.9 million the city was spending on North Cross Industrial Park.

But the EDA's $900,000 grant was never paid. It was held up in 1999 by the U.S. Environmental Protection Agency's lawsuit against the city over the dumping of raw sewage into the Maumee and the Ottawa rivers.

The EPA suit was settled in 2002 and the payment was made, but it was placed in escrow by the city pending the outcome of an audit.

The audit, released in August, 2004, found "multiple, material violations," the most serious being that the city allegedly allowed the private developer to award construction projects, creating a conflict of interest.

But it found other errors, including that the developer hired "related-party contractors;" the city used improper procurement procedures; the city's financial management system was inadequate, and the project proceeded without EDA approval.

The city has disputed all the audit findings.

John Loftus, special assistant to the mayor, said in a written response that the city tried to deny payment of the "related-party contracts" but was overruled by a jury in a lawsuit brought by the developer. The two contracts totaled $159,530. One was for an excavation company controlled by the developer. The other was for a landscaping company owned by the developer's son-in-law.

Ms. Herring said the city's relationship with Mr. Perry was made clear to EDA from the start.

"We continue to believe we're entitled to the grant because the project was built," Ms. Herring said, acknowledging that "the communications and record-keeping were poor."

Mr. Loftus claimed the city oversaw every step of the advertising and awarding of construction contracts.

Contact Tom Troy at:

tomtroy@theblade.com

or 419-724-6058.



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