Developer, city said to reach grant-repayment pact

January 11, 2007|By Jill Rosen | Jill Rosen,sun reporter

A Baltimore developer who made nearly a million dollars selling a building she bought with a public grant after promising to turn it into low-income housing has, after months of negotiations, apparently reached an agreement with the city to repay some of the money.

Savannah Development Corp. President BettyJean Murphy, who received a $368,000 community development block grant in 1995 to buy an old Mount Vernon school and convert it to affordable apartments, will repay $350,000, city officials said yesterday.

After 10 years of making little progress with the property, Murphy sold 10 W. Chase St. in December 2005 for $1.3 million to Washington-area developers planning to turn it into upscale condominiums.

Because of a sloppy contract that did not protect the city should Murphy renege on the deal, once officials belatedly learned of the sale last spring, they had little leverage to force her to repay the profit but insisted she return the base grant.

The city has yet to see a dime from Murphy. The payback agreement has not been signed -- though officials expect it to be within weeks.

"The deal was crafted between the city solicitor's office and the lawyers for Savannah," said David Tillman, spokesman for the Department of Housing and Community Development.

"We essentially don't do business like this anymore in the city," he added. "We don't give grants to for-profit companies, and we make sure our loan and grant agreements are written so the city has some ability to recoup funds."

Murphy's attorney, Kenneth Frank, did not return a phone call yesterday.

When officials approached Murphy about repaying the grant last spring, she balked. At the time, Frank said that Murphy might not have to repay the city anything because she spent so much trying to redevelop the property.

Housing officials gave Murphy a deadline of June 1 to prove how she spent the money. But on that date, Tillman told The Sun that Murphy had been granted more time to find receipts.

It was unclear yesterday how many expenses Murphy had been able to document.

"[Deputy Commissioner for Development Christopher Shea] was satisfied that there were a number of expenses that they incurred," Tillman said, adding, "The grant agreement did not give us a lot of teeth to recapture anything but the purchase price."

It will be years before the city gets its money.

Murphy will repay the $350,000 on an installment plan, making three payments of $50,000 a year until the debt is covered.

She will not have to pay any interest, nor will she have to repay the additional $18,000 used to cover closing costs at the time Murphy bought the building.

The money will be funneled back into the city's community development block grant pool, a fund that has been drying up for years because of federal cutbacks.

Furthermore, though housing officials threatened to cut Murphy off from further city deals until she repaid the money, Tillman said the agreement puts the developer back in his department's good graces. Yesterday, the Board of Estimates approved a $1.3 million loan for refinancing one of Murphy's projects, a senior facility in Park Heights.

"It was the best-case scenario," Tillman said.

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