News Column

Minority-business Nonprofit Fights Fla. Over Loans

September 6, 2013

It was supposed to be a quick, taxpayer-funded shot in the arm to help struggling small businesses grow despite a bleak economic environment.

But the "economic gardening" loan program hatched by Gov. Charlie Crist during the depths of the Great Recession now has turned into a two-year legal fight that is threatening to shutter a major minority-business support organization.

The state Department of Economic Opportunity is demanding that the Black Business Investment Fund of Central Florida -- an Orlando-based nonprofit that administers loans for minority businesses -- return $1 million in taxpayer money the state says it over-charged to run the program.

But BBIF supporters say that state has bungled the project from the start -- and that repaying the cash would shutter the non-profit and cost the Orlando area's minority community an important job incubator.

"The state is culpable in this whole situation," said Sen. Geraldine Thompson, D-Orlando.

"They've done everything they were supposed to do. If there's a demand that they pay that amount of money at once, absolutely they would" shut down.

In a sign of how testy the fight could get, last week the BBIF refused to turn over the salaries of its top administrators and other financial information the state claims it needs to figure out where the money went.

The BBIF, headed by Inez Long, says it has administered $38 million in loans to black, minority and under-served businesses since 1988; Orlando Commissioner Daisy Lynum is a board member. It was tapped in 2009 to run an $8.5-million Economic Gardening loan program that lawmakers rushed to create in a special session.

It has loaned $7.8 million to 38 businesses, of which $4.5 million has been repaid. DEO could not provide any evaluation of the program's success.

But from the start, red flags were apparent. A rival bidder, Florida First Capital Finance Corp., complained there was no way to make it work for the loan-servicing fees allowed under the statute -- essentially, about 0.6 percent of the loan amounts, or $49,218 a year.

Within months, the BBIF was warning Crist's office that it needed more resources to run the program.

"I believe [BBIF's president] indicated they were having trouble making it work at the statutory rate," said Dale Brill, who was Crist's economic development director and first hatched the economic gardening idea.

Six months after the program was launched, an analyst in Brill's office told BBIF Vice President Duane Lewis in an email that the company could charge the 0.6 percent rate monthly, which added up to over $450,000 for 2011.

After Gov. Rick Scott took office in 2011, his new jobs agency -- DEO -- demanded repayment -- but agreed not to oppose an attempt by the BBIF to ask legislators to appropriate $1 million to help it repay the fees.

Thompson sought the money, but she was rebuffed by Sen. Andy Gardiner, an Orlando Republican slated to lead the chamber in 2014, who was also pushing to reform other job-creation programs.

"Supposedly the department told them, 'We got to get our money back somehow; if you want to ask the Legislature to give us money,'" Gardiner said. "That didn't make sense to me."

"... If you're going to have scrutiny of all these programs, I'm not sure why we would say we'll just forget about that."

In June, DEO revoked BBIF's contract, seeking $457,000 in alleged overcharges and another $575,000 in loan funds that had apparently never been awarded. It also asked the organization to hand over its books and cease handling the loans.

"We appreciate the work of BBIF," said DEO spokeswoman Monica Russell. "However, DEO has a responsibility to protect and account for taxpayer dollars."

BBIF says it will keep managing the program during the legal fight "in the interest of good stewardship for the Florida taxpayers and to mitigate its damages."

Responded Jasmine Houston, a BBIF marketing and development officer: "BBIF provided all the services required under the state contract -- and more -- and only looks to be paid under the terms of the state contract that BBIF entered into in good faith."

adeslatte@tribune.com or 850-222-5564

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Source: Copyright Orlando Sentinel 2013