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RDA fails to make loan payment
by Allen Davis
Staff Writer
Posted: Wednesday, 21 Nov. 07; 11:30 p.m.
The cash-strapped Coatesville Redevelopment Authority may be close to defaulting on a $7 million loan that was used to spur what at one time was thought would be $700 million in revitalization projects.
The fact that the RDA was unable to make last month's $33,000 interest payment was made known at Monday night's RDA meeting, but only because council President Patsy Ray questioned the status of the loan. Ray is not a member of the RDA; however, she attends most authority meetings.
Ricky Dean, the city's financial director, said the city was forced to pay the $33,000 payment and will make the next two payments. Dean also said the had contacted him and questioned whether they should call the $7 million loan due.
At the RDA meeting, Dean said the RDA's debt service and operating expenses would be part of next year's city budget. But by a special budget request meeting last night, that decision had been rescinded. According to Dean, the RDA has two offers for land it and it is "reasonable to expect execution of one of those by next year."
The RDA's ability to meet its financial obligations has been an issue for several months. Monday night RDA Chairman Paul Givler questioned why there were no list of bills to be paid. He was told by Dean the city would now be paying all RDA bills.
"Does that mean we don't approve them?" Givler asked.
"No," said Dean, explaining the RDA would still approve what bills to pay, but payment would be made from city funds.
Although council appoints members to the five-member, authority board, the RDA operates as a separate entity from the city, much like the old Coatesville Water Authority did before being sold to Pennsylvania American.
The RDA's failure to meet the monthly interest payment was not on the authority's agenda; it only became known when Ray questioned the status of the $7 million loan during the section of the meeting reserved for public comments.
| RDA purchased properties | Price Paid |
| G.O. Carlson Properties | $1,627,967.62 |
| ISG (Mittal now) | 193,349.54 |
| Cohen | 131,484.90 |
| 114-116 E. Chestnut | 169,485.88 |
| 101 E. Lincoln Hwy. | 414,041.00 |
| 129-133 E. Lincoln Hwy. | 108.839.00 |
| Train station properties | 756,166.25 |
| 309-311-313 E. Lincon Hwy. | 410.293.44 |
| 300 E. Lincoln Hwy. | 300,000.00 |
| Total | 4,111,627.81 |
In 2004 the RDA approved a $7 million line-of-credit with First Financial Bank, now Willow Financial, to purchase land needed for the city's revitalization. Earlier, city council had approved a resolution putting up the city's tax base as a guarantee for the RDA loan. At the same time, the city borrowed an additional $1.48 million to replace city funds spent beyond the $5 million bond earmarked for development of the now defunct regional recreation center and its ill-fated golf course. The only two council members to vote against the borrowings were Ed Simpson and Marty Eggleston.
Now, those familiar with the $7 million loan say the city may not be exposed as believed. The problem, said city officials and bankers knowledgeable of the issue, is that the security pledge was between the RDA and the city and not between the city and the bank.
"We are in a very strong position," said Walker, following Monday night's RDA meeting. Walker confirmed the city is considering moving what remains of the Trust Fund, about $22 million, from First National Bank of Chester County to Willow Financial. "Or we could just leave it where it is and negotiate a loan with them," he said.
Walker remains confident that the RDA will be able to meet its financial obligations. "I'm about 50/50 sure," he said. That optimism revolves requests by two utilities to build power generators on the Flats. Monday night the RDA unanimously authorized Walker to enter into negotiations with what so far he has identified only as "two utility companies" that could generate millions of dollars and make the RDA financially solvent.
In October 2006, Givler told council $4.1 million of the $7 million loan had been spent on land purchases.
You can e-mail Allen Davis at: allen@chestercountyreporter.com
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