LORAIN — Lorain Development Corp. will no longer be affiliated with the city.
“The purpose of this correspondence is to inform you that the City of Lorain, and its sub-department of the Building, Housing and Planning, has chosen to not renew or extend the sub-recipient agreement with Lorain Development Corporation, which expired effective March 31, 2016,” Director of Building, Planning and Housing Leon Mason said in a letter dated April 19 to LDC Executive Director Doug Rangel.
Mason said the decision shouldn’t come as a surprise due to the nature of how the situation has progressed.
At a City Council committee meeting April 11, Mason detailed more than $600,000 in loan write-offs that had been approved by the development corporation’s loan board, including a $250,001 loan for South Shore Community Development Corporation and St. Joe’s Community Center.
At that meeting, Mason expressed his displeasure and said he would get to the bottom of the matter.
In Mason’s letter to Rangel, Mason said the development corporation has until today at the close of business to turn over all documentation to the city per the corporation’s agreement with the department.
“I need to go through all of this along with members of my department,” Mason said. “I don’t want to alarm the public, but we need to see the documentation to see what the city is on the hook for when it comes to these loans.”
Mason said since the loans come from the federal government through the city to LDC, the city could liable for millions of dollars to the federal government.
“I won’t know for sure until I see everything,” he said.
Mason said April 12 that the Department of Housing and Urban Development came to evaluate a randomly selected 15 loans that had been approved by LDC and were being collected by the city.
“Only two of them were deemed compliant,” he said. “The other 13 saw no job creation, and (Housing and Urban Development) had a huge problem with that. I have a huge problem with a lot of this. Were these loans even legal to be given out in the first place? It’s something I’ll have to look into and discuss with board members.”
Robert Ellis, a local attorney and president of the LDC board, said the corporation, a nonprofit, has two options — it can find another foundation that is willing to loan money to businesses in Lorain, or it can dissolve.
“Right now I’m leaning toward the latter,” Ellis said. “But we currently have about $7,000 that needs to be paid for employee benefits and salaries and things like that, so once we hear from the city as to how to handle that, we’ll make our decision.”
Ellis said while he favors LDC shuttering its doors, he is just one vote on the board of five, and others may have ideas on how to keep gong.
“But now that our partnership is ending with the city, we don’t have any assets to do work,” he said.