Budget talks put focus back on developer's debt to city

May 18, 2006|By JILL ROSEN | JILL ROSEN,SUN REPORTER

To compensate for an ever-shrinking stream of federal affordable housing dollars, Baltimore plans to dip into its own budget next year to stave off cuts to city programs.

With city tax dollars at stake, officials say it's even more critical to force a developer to repay the nearly $1 million she made by selling a building bought with a community development block grant.

"Now we have more vested interest than ever to recapture those funds," said Baltimore City Councilman Robert W. Curran. "Who else is out there who owes us block grant money?"

Savannah Development Corp. President BettyJean Murphy used a $368,000 community development block grant in 1995 to buy an old Mount Vernon school building with the promise that she would convert it into apartments for the poor.

Without renovating the building at 10 W. Chase St., she sold it in December for $1.3 million to developers with plans to build upscale condos.

Because the city erred in its 1995 contract with Murphy, the developer is legally obligated to repay the original grant but not the $932,000 she made by selling the building.

City officials contend Murphy must turn over the profit, too. But Murphy says she spent much of it attempting the conversion. She has until June 1 to prove that to the city's housing department.

The developer's attorney, Kenneth Frank, said Murphy will repay the grant.

"Whatever is legally owed to them, Savannah will pay back," Frank told The Sun last week.

Housing spokesman David Tillman said yesterday that with the federal dollars for affordable housing programs drying up, the money from Murphy, if it's returned, could be recycled into programs for the needy as soon as this year.

"It's a significant amount of money that could absolutely be in use," Tillman said. "We have every intention of making sure [the housing programs] get it as soon as possible."

According to federal rules, if Murphy doesn't repay the original $368,000 grant, the city will have to repay it to the block grant program. Though Murphy sold the building in December, she has yet to pay.

This week budget officials told the City Council that in fiscal 2007, the city would have to tap into nearly $3 million from the general fund to prevent cuts to programs paid for with federal community development block grants.

Hundreds of nonprofits in Baltimore depend on the federal money, which also funds some of the city's biggest housing initiatives, including programs that shelter the homeless and help low-income people with AIDS.

Additionally, Baltimore is relying on block grant money for its new $59 million affordable housing trust fund, created last year to win support for a $305 million convention center hotel.

Curran said he takes issue with the city using general fund money for these programs when Murphy still hasn't paid.

Chris Shea, Baltimore's deputy city commissioner for development, said he is confident the city will get the money back - at least the $368,000.

"This $368,000 will come back and [get] back out on the street," he said. "If not, I'm sending the repo man out there with a tow truck."

jill.rosen@baltsun.com

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