The current plan to rehabilitate Center City downtown is providing a chance to sort out a decades-old, $750,000 loan due for repayment to Schenectady by 2011. The payment will be in installments over the next 10 years, which will mean cash flow for the city and is a better deal than some that have gone before, officials said Monday.
Ray Gillen, the county’s top economic developer, said the deal is the best possible because vague language in original financial documents left open the interpretation the loan did not have to be repaid.
The city announced last week it will use a $2.5 million grant from the Restore NY Communities Initiatives Program to renovate the 170,000-square-foot Center City complex at 415-419 State St. The Galesi Group is to buy the complex and will contribute at least $2 million toward its renovation.
Center City is a downtown anchor at State Street and Jay Street. The complex was built in 1980 to help revitalize the area but the project ran into financial and other problems almost immediately and never lived up to its potential, local officials said.
The city used money from the federal Department Housing and Urban Development to make the zero-interest loan of $750,000 to Wade Lupe Companies. That was part of the financing for Center City, which cost $7 million. The federal grants were to be used to battle poverty and urban blight beginning in the late 1970s.
Now, under terms of the proposed agreement with Galesi, Wade Lupe Companies and the Metroplex Development Authority will repay the loan over the next 10 years in $75,000 installments.
Lupe will be responsible for $25,000 of the total and Metroplex the rest, said Metroplex Chairman Gillen. Metroplex is a public authority that receives funding from a portion of the county’s sales tax; it also has the ability to issue bonds.
Gillen said the loan needs to be repaid to the city and this is the best deal to accomplish that. “The program that issued the loan is no longer around, but there is an obligation, we think, to repay it. It is a loan,” he said.
Lupe had to repay the loan in its entirety in 2011, or unless it sold its interest in the Center City complex. “It was a deferred payment. We were not supposed to make any payments on it,” said Shelley Lupe of Wade Lupe Companies.
Gillen said, “We worked cooperatively with them on this. The way the documents were written, there was a question as to whether this loan was due in full or whether it would turn into a grant.” He said the matter could have ended up in litigation for years.
Mayor Brian U. Stratton said, “There was never any hope that the money was going to come forward.” He said the deal is the “best way to get the money, otherwise there would be nothing, the same-old, same-old. We’ve learned through hard experiences that it doesn’t happen the way we expect.”
Stratton said as part of deal, Galesi will pay property taxes on Center City’s full property value this year. Galesi will receive reimbursement through the state’s Empire Zone Program.
For the last 28 years, Lupe had a payment-in-lieu-of-taxes agreement in which it paid the city $10,000 annually on a property worth millions. The agreement expired in 2007.
Lupe owns the Wallace Building, one of two buildings that comprise the Center City complex. The city owns the soccer field inside the second building, which is on the site of former commercial buildings. The city Industrial Development Agency owns the parking lot behind Center City.
Lupe took possession of the Wallace building after repaying $3 million in tax-free bonds over 25 years. The city built the indoor skating rink — now the soccer field — using some $3 million in federal grants.
Galesi is forming a new corporation, Development at Center City, to manage Center City. It will have 90 percent control of the complex and Lupe will control 10 percent. The city will surrender control of the soccer field to the new corporation, and Metroplex will take control of the parking lot, its eighth in the city. It will lease the lot to Galesi for $40,000 annually for 10 years. Metroplex plans to spend up to $450,000 in improvements to the parking lot.
The lease will cover all but $10,000 of Metroplex’s portion of the $50,000 installment payment, Gillen said. Metroplex will recoup the remaining $10,000 through deals associated with its control of the parking lot, he said.
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