Cornell’s Restaurant filed for Chapter 11 bankruptcy protection

The owner of Cornell’s Restaurant filed for Chapter 11 bankruptcy protection Friday to protect the Little Italy eatery from creditors, including foreclosure by American Tax Funding.

JoAnn Aragosa, owner of 39-45 North Jay Street Corporation and Cornell’s, said the restaurant remains open.

The corporation owns the land and building housing Cornell’s Restaurant. The Metroplex Development Authority owns the parking lot used by Cornell’s and other businesses in the area.

Aragosa said business at the restaurant remains good, but that the corporation is behind in its taxes. The corporation’s tax delinquency amount was not immediately available, but at one time she owed nearly $1 million to various agencies.

The Chapter 11 filing forestalls a foreclosure action begun this year by American Tax Funding, which handles tax liens for the city of Schenectady.

“Business at the restaurant is outstanding. In fact, sales are up over 20 percent from last year,” Aragosa said. “We are taking this action due to tax liens and other debts. We are current with all of our suppliers and vendors, but we are behind on our taxes.”

Metroplex Chairman Ray Gillen said a review of Cornell’s financial reports, which Aragosa submits to the authority, indicates the “problem at Cornell’s is not on the revenue side. The restaurant is very busy and revenues continue to grow.”

Gillen said the problem is tax liens and debts that date back nearly a decade to when Aragosa relocated her restaurant to North Jay Street. “The project simply has too much debt and was poorly structured. Chapter 11 appears to be the only viable option to allow the company to work out agreements with its creditors,” including Metroplex, he said. Aragosa owes Metroplex $224,000. Gillen said Metroplex retains possession of the parking lot and has a personal guarantee from the owner, “which it will pursue if necessary.”

The family-owned restaurant was on Van Vranken Avenue for decades. At the urging of former city and economic development leaders in 2001, Aragosa agreed to relocate the restaurant to North Jay Street to help initiate the Little Italy Project there.

Aragosa bought a building at 39 North Jay St., leaving a structure on Van Vranken she had rented since 1973. She said at the time of her relocation to North Jay Street that she needed to expand to accommodate more customers.

At the time, Aragosa received a $100,000 loan from the city’s Economic Development Fund and a $100,000 loan from the now-defunct Schenectady Economic Development Corporation. She also received a $440,000 loan from the New York State Business Development Corporation. Her own investment was approximately $120,000.

The business development corporation is a private agency that receives money from more than 160 New York state commercial banks and thrift institutions. It helps creditworthy small- and medium-sized business, especially minority- and women-owned businesses.

In 2003, Metroplex, then under the chairmanship of John Manning and a different board, gave Cornell’s a $235,000 loan and a $235,000 grant to help pay relocation costs. “The current board had no role in this project,” Gillen said.

In 2006, Cornell-Aragosa restructured the loans received from the New York State Business Development Corporation. At the time she also owed the state nearly $155,000 in withholding and sales taxes.

Categories: Business