Full Review of Providence Loan Program Coming
Thursday, December 08, 2011
The government agency that oversees the funds awarded to the Providence loan program that has come under scrutiny in recent months says it will begin a comprehensive review of the program at the beginning of the year.
As GoLocalProv first reported in October, about 25 percent of the small business loans dished out by the Providence Economic Development Partnership (PEDP) were at least 90 days past-due, leaving the city stuck with $3,358,637.67 in delinquent loans. A lawyer for the PEDP said the nonprofit agency was only pursuing collections against 11 companies that had received just shy of $1.4 million in funds.
Now the Department of Housing and Urban Development (HUD) says it wants to take a closer look at the delinquency rate of the loans. The PEDP’s funds come from HUD in the form of Community Development Block Grant (CDBG) money, which is awarded to cities across the country every year.
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On Wednesday, HUD spokesperson Rhonda Siciliano confirmed that all new PEDP loans must receive a written determination from the Community Planning and Development Offices in Boston. She said HUD is currently looking at two loan requests at this time and noted that because of complaints received about the PEDP’s loan delinquency rate, “a full review of PEDP’s HUD-funded loan portfolio is expected to take place at the beginning of 2012.”
Questionable Tactics
The PEDP has a 16 member board that includes prominent members of the business community and politicians and is chaired by Mayor Angel Taveras. Jim Bennett, the city’s new Economic Development Director, oversees the program. Many of the loans that are currently past-due were awarded during Mayor David Cicilline’s administration.
The agency has been accused of using questionable tactics to hide the high delinquency rate, including making decisions to not write off several loans that are long past-due and simply converting other loans into grants.
Since 2008, a loan that went to the fund the Bank of America Skating Center and another that was awarded to the Trinity Repertory Company have been written off and converted to grants.
More Oversight
When GoLocalProv first reviewed the PEDP, the agency’s lawyer, Joshua Teverow, defended the organization’s practices, arguing that many businesses would not have been created without help from the city. He acknowledged that the default rates are higher than ever before, but said he believes the economy is the reason, not a failure to correctly assess applicants by the PEDP.
Both Teverow and Thomas Deller, the PEDP’s former executive director, have said the loans tend to be a risky endeavor for the city. In most cases, business owners must be turned away by two banks in order to qualify.
“It’s no guts, no glory,” Teverow said in October. “The nature of economic development is that you’re supposed to take a chance.”
But City Councilman David Salvatore has called for more oversight of the program. Salvatore has argued that Providence taxpayers have an interest in knowing whether loan recipients are going to create jobs in the city.
“The best way to make that happen is to be sure that all the decisions related to the PEDP funds are being made in the light of day, with the opportunity for public input along the way,” Salvatore said.
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