$270,000 is focus of city debt dispute Agencies split on status of leases, rent due

millions may be lost

August 02, 1996|By Michael James | Michael James,SUN STAFF

Baltimore real estate officials say Morris A. Iles owes the city $270,206 for 14 years of back rent and taxes. Iles counters by saying they're wrong.

In a court battle symbolic of the problems surrounding management of the city's $3.2 billion real estate portfolio, no one seems to know who is right.

Even though the real estate department filed suit against Iles for back rent, another city agency, the law department, had a judge dismiss the case in rent court Tuesday, apparently wiping the rent slate clean for Iles.

That prompted tirades from Baltimore Comptroller Joan M. Pratt and her real estate officer, Anthony J. Ambridge, who claim that Baltimore has lost millions of dollars because city agencies are grossly unorganized in collecting rent.

"I can't believe the city doesn't want to collect rent," Pratt said after being informed that the Iles rent case was dismissed.

"Here's an opportunity for the city to collect dollars that it should have been collecting all along, and when it has the chance to right itself, it doesn't do it," she said. "It's incredible and it's very frustrating."

Iles runs the nonprofit Park Heights Development Corp., which manages small-business "incubator" programs at 2901 and 3000-3002 Druid Park Drive. He collects rent from about 36 small businesses in the city-owned buildings.

The Druid Park properties and 40 others are highlighted in a real estate report released by Ambridge this week that contends that city paperwork is so sloppy that he can't be sure what the city owns, on what it should be collecting rent and where tax bills should be sent.

Chief among the problems are too many city agencies overseeing rental properties and nebulous lease agreements that leave city officials wondering how to interpret them. Iles' case is said by Ambridge and Pratt to be the most egregious example of uncollected rent and taxes.

But Isles sees it simply as politics.

"I'm being used as a political football," he said of Ambridge's first major project since being appointed in June to the real estate job by Pratt. "This report is being used as a political thing to attack the mayor. It's a power grab by [the] city [office of] real estate."

Iles won in rent court when the city solicitor's office opted not to pursue $122,917 in back rent on the Druid Park properties. In addition, Iles said he is meeting with city housing officials next week to discuss "options" for paying back $147,289 in unpaid taxes on the properties.

Profit disputed

His primary defense in the rent case is his claim that the 3000-3002 Druid Park Drive property didn't make any money beyond operating expenses. Under the lease, he wasn't obligated to pay rent unless the property turned a profit.

But Ambridge claimed that a financial audit of the property's records showed profit for 1982 through 1987, and a rent obligation of $43,917. Ambridge also said the 2901 Druid Park Drive property owed a total of $79,000 in rent for 1992 through 1996.

City officials gave Iles the first three years at 2901 rent-free as an incentive to develop the properties as low-rent locations for minority businesses. Such deal sweeteners are common in the wrangling between city officials and prospective buyers of buildings to be used for community development projects.

But those deals seem to be part of the reason the city is having trouble keeping the books straight. Rents often are based on complicated and murky financial formulas worked out -- in some cases -- more than a decade ago.

"The partnership I worked out was with a previous administration," Iles said. "When the new [Schmoke] administration came in, we just fell through the cracks."

Pratt and Ambridge say such scenarios, in which leases have become points of debate, are playing out around the city.

But the real estate officials say their hands could be tied if they can't pursue legal action.

Ambridge blasted the city solicitor's office for not pursuing the rent in court, calling the decision to dismiss the case "an abuse of power" that sets a bad precedent.

"I had a woman in here the other day that we're evicting from public housing. We'll evict her, but not a businessman who's making a living at the city's expense," Ambridge said.

'Trying to work this out'

Jyoti A. Kumta, the assistant city solicitor who handled the case, said officials had been negotiating a settlement with Iles when the city real estate office "inadvertently filed" the lawsuit.

"We were, and still are, trying to work this out," Kumta said. She said the city still contends Iles owes the back taxes.

"It's not a typical lease. Was rent really due? That was not determined," she said.

In the cases outlined in Ambridge's report, the rent question seldom is clear. For instance, another property in question is a carousel operated on an Inner Harbor parcel owned by the city.

Ambridge concludes that the carousel may have a lease -- or it may not. The only lease in city records that he could find expired in 1990.

"There is no record of cash-flow payments being made to the City of Baltimore. This department is unable to ascertain if the tenant is under a new lease agreement or if rental payments were being made," the report says.

Clinton R. Coleman, a spokesman for Mayor Kurt L. Schmoke, said the mayor hasn't had a chance to read the report. In principle, the idea for better asset management "sounds like a rational premise," Coleman said.

"In general we want better everything," Coleman said. "The question is whether there's a need for this or not, and that's something we're going to have to look into."

Pub Date: 8/02/96

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