News Column

EDITORIAL: County too slow to deliver with $10 million in HUD loans

April 25, 2014

The Times Leader, Wilkes-Barre, Pa.

April 25--If your mother gives you $5 to buy milk but you return from the store without a fresh container, Momma wants her money back.

And fast.

By contrast, Luzerne County apparently believes when it receives money to achieve a specific result, such as create jobs, it can just let the deal slide, and slide, without delivering. The U.S. Department of Housing and Urban Development, acting in a motherly sort of role, flexed its authority this month, demanding the county repay $10 million in loans for seven area projects that it says have failed to live up to promises, delivering zero jobs.

Among them: the failed Hotel Sterling renovation. The landmark building in downtown Wilkes-Barre, to which $6 million in federal funds was directed, has so far generated employment only for demolition workers and lawyers. The city condemned the structure in 2011 and crews leveled it last July, leaving an empty lot mired in legal limbo.

The nearby Sterling Annex on the city's North River Street, also a recipient of federal funding, has yet to be put into productive use. The Greater Wilkes-Barre Chamber of Business and Industry bought the property for $125,000 in 2004, reselling it nearly a decade later to a private developer who voiced intentions of converting it into housing units. To date, diddly.

Other local projects drawing HUD's rebuke, delivered in the form of a March 31 letter, include the downtown Innovation Center and initiatives of the Wilkes-Barre chamber and its affiliates, and ventures launched by CAN DO Inc., the Hazleton-area economic development agency.

CAN DO previously repaid at least one of the contested loans, said county Community Development Executive Director Andrew Reilly. It's doubtful the county will be compelled to cough up the rest, as HUD's decision can be challenged before an administrative law judge, according to the county's chief solicitor. More likely, the federal department can be appeased if the county simply shows a willingness to resolve the matter.

HUD's recent crackdown by no means singles out Luzerne County. Rather, the federal department a few years ago identified more than 22,000 projects initiated between 2000 and 2006 across the nation that subsequently fizzled or have "remained open for extended time periods," according to the letter from Yolanda Chavez, HUD's deputy assistant director for grant programs in Washington, D.C.

County administrators contend all seven projects should create jobs -- eventually. That argument, as it pertains to the Hotel Sterling, seems a bit disingenuous, like seeking a conservation grant for a forest, then cutting down the trees and proclaiming, "Look, now there's lots of sunlight to help plants grow!"

More convincingly, the county points out that HUD attached no time limit for job creation. And the Great Recession delayed or derailed progress in most corners of the country, particularly the slow-to-recover Wilkes-Barre/Scranton metro area.

For its part, HUD should add teeth to its loan regulations, attaching firmer deadlines but allowing for some unforeseen exigencies (such as, for example, a worldwide economic downturn).

Area residents, meanwhile, would be wise to further scrutinize the impact of Luzerne County's economic development efforts. Since 1982, its community development business loan fund awarded about 670 loans, creating 16,613 jobs and preserving another 5,000-plus that were in jeopardy, according to county Manager Robert Lawton's written response this week to HUD. Is this a sufficient bang for the buck?

Lastly, the county's borrowers can be more prudent about assuming debt only for projects with realistic prospects for success and reasonable time horizons for delivering a payoff. It makes no sense to tie up funds indefinitely without showing results. There's also no good reason to needlessly raise the ire of HUD.

Remember, Momma can always cut off your allowance.


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