City tries to recoup lost $21 million loan that went unspent

5-year deadline missed

money needed for project

February 13, 2003|By Eric Siegel | Eric Siegel,SUN STAFF

When city officials tried to draw on $21 million in previously approved federal loan funds to pay for the first property purchases for the East Baltimore biotech project, they got an unwelcome surprise.

The money, they were told by federal housing officials, was no longer available because it hadn't been spent within a five-year limit from the time the loan was granted.

City officials, who say they weren't told of the limitation until late last year, are using state funds to pay for the initial acquisitions as they scramble to put together a new federal loan application to help buy, demolish and rehabilitate properties for the project north of the Johns Hopkins medical complex.

The federal money is a critical component of early financing for the project, which is expected to cost hundreds of millions of dollars in private and public funds, take a decade to complete and revitalize one of the most distressed areas of the city.

"Because the project is so important to the city, we are doing all we can to get the application done as quickly as possible," said Ruth M. Louie, assistant housing commissioner for community development, who presided over the first of two required public hearings for the application Tuesday night.

Louie said she has had "numerous conversations" with officials at the U.S. Department of Housing and Urban Development and has been assured that the agency would give fast-track review to the new application.

A spokesman for HUD's Baltimore office confirmed that the agency has pledged to move quickly on the application.

"Not only are we willing to give it an expedited review, we will work with the city to put together an application that should meet our requirements and be approved pretty quickly," said the spokesman, who noted agency policy in asking that he not be identified by name.

If speedy approval is granted, it should not delay the biotech project, said Laurie B. Schwartz, interim chief executive officer of East Baltimore Development Inc., the quasi-public agency set up to oversee the development of the biotech park and hundreds of units of new and renovated housing.

With $2 million in state funds to draw on now and another $2 million in city funds available in July, Schwartz said, the money from the federal loan should not be needed before summer, when rehabilitation of some vacant properties is expected to begin.

If money from the new loan application is not available by then, Schwartz said, other options for funding will be considered. "There's an interest in getting development activity under way," she said.

The $21 million represents the money that remains from a $34 million loan administered by the Historic East Baltimore Community Action Coalition. When the administration of Mayor Martin O'Malley concluded that the coalition's piecemeal approach to the rehabilitation of properties wasn't working, it froze the use of the money while it developed a more comprehensive plan centered around the biotech park.

A second hearing on the new application for a loan for East Baltimore will be held late next month, city officials said. The application also requires approval by the Board of Estimates, they said.

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