Loans Aren't Gifts

August 04, 1992

Few would question the good intentions behind city government loans to developers of splashy hotels, restaurants and other businesses that could bring tourists, tax dollars and renown to Baltimore. But many readers of Joan Jacobson's front-page story in The Sun of Aug. 2 must wonder why city officials take such a cavalier attitude toward the tens of millions of public dollars in loans that remain unpaid by the developers who received them.

The Loan and Guarantee Program, the city loan bank started in 1976 by then-Mayor William Donald Schaefer, has backed some big winners. For example, the city lent the Hyatt company $10 million to build the Inner Harbor Hyatt Regency, whose success led to loan repayments that were put into other downtown projects. That's how the system should work.

However, loans also have gone to million-dollar lemons like the Fishmarket and the Pimlico Center. Realistically, you don't expect to see much repayment from losing ventures. Yet you wouldn't say the same for relative successes, like the Omni Hotel and Tindeco Wharf, whose owners took city loans and haven't begun repaying them.

Often the obstacle has been an agreement between the city and the developer that repayment isn't required until profits are realized and other loans are repaid. Many developers say they aren't even close to achieving those two things.

Owners of failing as well as successful businesses argue that they deserve a break because they took the chance of coming to the city when most developers focus on the suburbs. They also say their businesses benefit the city through property taxes and the creation of jobs.

That argument would hold more water if the city could provide exact figures on the number of jobs and tax dollars generated by the businesses. But such figures have never been kept. Some developers don't even bother sending financial statements to the city. Anyway, city officials claim, they don't have the personnel to keep track of all the records.

The very unpleasant fact is that the city might never regain these funds, thanks to the repayment agreements struck with the developers and the city's lack of organized record-keeping.

Mayor Kurt L. Schmoke has stated that the city must continue to offer such loans, "if we're going to compete." We agree, but we would urge Mr. Schmoke and his underlings to shed their ho-hum attitude and devise an aggressive strategy for tracking and recouping these funds. Any future loans should be arranged so the idea of repayment is more than a fantasy to the concerned parties. A loan is a loan; it's not a gift. City Hall should remember that when public money is involved.

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