Federal auditors have criticized the city government for earmarking $5.5 million in federal Community Development Block Grant money to modernize and relocate a small, rundown West Baltimore bottling plant.
The city has already paid $1.4 million to purchase Custom Laboratories Inc. and to move the firm from its current location in the 900 block of W. Baltimore St. To rejuvenate the area, the city would like to see shops or new houses built on the site.
The costs -- which include relocating the firm and replacing its antiquated equipment -- are expected to total $5.5 million.
But auditors from the U.S. Department of Housing and Urban Development say the costs are "excessive" and they question the benefit to the city because the plant may move to Harford County, taking 40 jobs.
The deal with the bottling plant surfaced in the auditors' review of the city's Community Development Block Grant program. The review, released earlier this week, documents the city's inability to keep track of millions of dollars in federal money funneled to housing and poverty programs.
Under HUD guidelines, block grant money must be spent on projects that eliminate urban blight or provide housing or employment for low- to moderate-income people. The auditors' review bolstered local HUD officials' accusations that the city has not properly monitored the money.
But Housing Commissioner Robert W. Hearn said most of the review is a "rehash" of previous criticism from local HUD officials. He noted that the city has hired 10 employees to better keep track of the $22 million in block grant money the city receives from HUD.
City officials also defended the decision to move the bottling plant. "Sometimes you have to spend inordinate amounts of money to stabilize a community," said Deputy Housing Commissioner Harold R. Perry.
But the auditors have warned the city that it may have to repay the $5.5 million to the federal government if the deal does not create new jobs or housing or eliminate urban blight.
Auditors noted that the city housing officials they spoke with agreed that the deal will result in a "windfall profit" for the bottler.
For example, the city must replace the company's equipment and the firm's owners can resell the business without restriction. addition, the firm does not have to pay taxes on the relocation costs paid by the city.
The final $5.5 million cost figure for relocating the company does not include the city's cost of demolishing the buildings or rebuilding new houses there. City officials estimate the demolition could cost another $150,000.
The company is currently leasing the plant back from the city until it moves. Meanwhile, the city has not made definite plans for the site after the firm moves and community leaders worry that it will become just another vacant lot used as a dump.
"It's throwing bad money after bad," said Jackie Brown, president of the Concerned Citizens for Poppleton Neighborhoods, who wishes the city would spend the money instead to renovate vacant houses in her community.
Gary Letteron, president of the Hollins Market Neighborhood Association, said, "$5 million could do a lot for our area. I think it's pretty silly."
City housing officials said that the company has purchased property in Harford County but that negotiations are under way to persuade the bottlers to relocate to Fort Holabird Industrial Park in Southeast Baltimore.
Owners of Custom Laboratories, which also goes by the names New Gold Bottling and Sun Spot Soda, did not return a reporter's calls.