Toledo City Council rejects developer's request to forgive $500,000 loan

The Uptown Arts Apartments building on 14th street in Uptown Toledo.
The Uptown Arts Apartments building on 14th street in Uptown Toledo.

A prominent developer may have to declare bankruptcy on an affordable housing complex his company built in the early 2000s after Toledo City Council rejected his request to forgive a $500,000 loan.

Bruce Douglas wants to sell the 52-unit Uptown Arts Apartments at 336 14th St. to real estate investors Watermark Partners, but council needed to forgive the 16-year-old loan before the sale could proceed.

City officials authorized the loan in 2002, funded through federal HOME Investment Partnerships Program dollars. The loan was never collected on because the project was not profitable, city officials said.

Council with an 11-0 vote Tuesday decided not to forgive the loan and not to sell Watermark Partners the city-owned land upon which the complex sits. Councilman Tom Waniewski was absent for the vote.

There was little discussion at the meeting, but councilmen have voiced concerns about the proposal for weeks.

The city’s loan was part of a $5.9 million mortgage package from banks and local and state agencies that allowed Mr. Douglas and his company, Adams Street Limited Partnership LLC, to develop the property. Mr. Douglas this month said he never expected to have to pay the loan back because the development did not turn a profit.

“It doesn’t work. We’re going broke on that deal,” Mr. Douglas previously told The Blade.

He could not be reached for comment Tuesday evening.

Mr. Douglas is a former chairman of the University of Toledo’s board of trustees and served on the Toledo-Lucas County Port Authority. He was briefly a Democratic candidate for Ohio governor in 1998 and was in the mix of superintendent candidates for Toledo Public Schools in 2000.

Councilmen had intended to set a committee hearing on the matter, but Councilman Yvonne Harper on Tuesday called for a vote.

“We’re going to look at it much closer,” she said. “This request could come back, but I think it’s going to be more involved. There’s more questions.”

She said she also wants city council to exercise more scrutiny when it comes to granting loans or tax abatements for housing developments going forward.

In addition to the HOME loan, the city invested $350,000 in capital improvements surrounding the site and leased the city-owned property on which the complex sits for $1 per year.

Mr. Douglas also benefited from community reinvestment tax abatements on the property, Lucas County property tax records show. He did not have to pay taxes on the new construction for 15 years. His annual property taxes on the site shot up from about $5,000 to about $50,000 when the tax abatement expired in 2017, records show.

“What was presented to city council was these were viable projects. Now the tax abatement is beginning to peel off, and what we’re told is that they don’t work,” Councilman Peter Ujvagi said. “Was it the developer that didn’t have the right information? Did the economics change so much during that time frame? We can’t always let the taxpayers of Toledo hold the bag.”

Councilman Rob Ludeman said he had too many unanswered questions about the financials of both the project and the proposed sale to forgive the loan.

Mr. Douglas and business partner Sam Thomas each stood to profit about $260,000 from the sale, city documents show.

Watermark Partners intended to update the property and keep the units low to moderate-income, according to its proposal submitted to the city. Mr. Ludeman said council will have to wait and see what happens with the property moving forward.

“We look forward to continuing to work with the City and are hopeful we can determine a path forward on the Uptown Arts Apartments project,” Watermark’s John Nechiporchik said in a statement Tuesday. “Our planned capital investment to provide a safer, cleaner and improved quality of life for the tenants will keep us pushing forward.”

Contact Sarah Elms at selms@theblade.com419-724-6103, or on Twitter @BySarahElms.