Director: Project ‘concerning’

Broadway Building funding at issue

A financial plan to pay for 58 apartments inside the Broadway Building is a bad deal for Lorain, said the city’s chief of building, housing and planning.

For months, local officials at the Lorain Port Authority have hammered out details on a plan for a $12.53 million renovation of the historic building at 301 Broadway, which was the former Spitzer Plaza Hotel and the Lorain Renaissance Inn.

The Port was to accept the building as a donation from Spitzer Great Lakes Ltd. and lease it to 301 Broadway Partners LLC, a company of developer James Louthen, to rejuvenate the 1926 building.

However, Lorain Building, Housing and Planning Department Director Leon Mason this week confirmed his opposition to the financial plan that would pay for the work.

“This is a project that’s extremely concerning,” Mason said.

The job is not cheap: Projected cost is $216,196 per unit, for a total of more than $12.53 million.

Louthen has asked the city to pay $1.075 million toward the remodeling.

The city’s contribution could come from Lorain’s allocation of federal aid known as Community Development Block Grant funds and HOME funds. The city gets the money from the federal Department of Housing and Urban Development to pay for community and housing improvement projects.

The other funding sources would be:

• Residential First Mortgage Loan: $4 million

• Historic tax credits: $3.71 million

• Affordable housing tax credits: $3.23 million • Owner equity: $515,000 The request for city funding came in an Aug. 18 letter from Louthen to Mason, who replied with his concerns in writing Aug. 31.

In a Sept. 16 email, HUD Program Manager Richard Hendershot said the agency’s Columbus Field Office also has concerns over the eligibility of the project to use Lorain’s federal aid.

Similar to Robbins?

In his Aug. 31 letter, Mason referred to a Jan. 27, 2014, report by Cook County, Ill., Sheriff Thomas J. Dart.

In October 2013, Dart began investigating a proposed development that Louthen was involved in

with the village of Robbins, Ill.

That report has “some extreme similarities” to Louthen’s request of Lorain, Mason said.

In Robbins, ALM Resources LLC, a company managed by Louthen, pitched a plan to build a quarry mining complex to bring new business and jobs to the village.

Robbins is a historically African American suburb of Chicago, that also sits atop a potentially valuable deposit of stone for construction, according to the sheriff’s report and news reports from the time.

The quarry project was promoted “as a public-private partnership to bolster a blighted area,” the sheriff’s report said.

The sheriff’s investigation found the Robbins redevelopment agreement had terms that “disproportionately favor the developer,” ALM Reources LLC, the sheriff’s report said.

The Robbins agreement allowed ALM Resources to withhold all payments to the village until the project was fully operational, that is, until the project could sell stone for construction by the Illinois Department of Transportation, the sheriff’s report said.

The Robbins agreement also stated the village would have the state legislature enact special legislation to speed the process of land acquisition, according to the sheriff’s report.

“The project lacked transparency and efforts to inform and advise the residents

of Robbins were insufficient,” the sheriff’s report said.

The sheriff found Louthen’s development team provided no upfront equity or lender financing and did not have the money to complete the project, Mason’s letter said.

“Unfortunately, this is eerily similar to the proposal submitted to the city of Lorain, as it lacks developer financial investment and there exists a request for an ‘upfront’ commitment which is not advisable by HUD,” Mason wrote. He referred to the federal Department of Housing and Urban Development.

Timeline in Illinois

The sheriff’s summary noted Louthen said his first contact with the village of Robbins officials dated from November 2011. His first public presentation to village officials was in December 2011, and he made more than 20 presentations about the project, according to the sheriff’s report.

At the time, Louthen’s companies contributed a total of $4,500 to the campaign of a village trustee who was running for mayor. He also reimbursed $800 to an employee who contributed to the candidate’s political campaign.

Louthen said “he did not recall any offer by (the candidate) for favorable consideration regarding the quarry project in exchange for the contribution,” the sheriff’s report said.

Robbins had a high crime rate and historic joblessness,

Louthen said, adding the industrial project would transform the village.

Louthen said his development team has experience working in distressed communities that need jobs and revenue, and they are proud of that.

His Retown website includes a section talking about Louthen’s experience creating a master plan for Robbins and recruiting expertise and investment.

Discussions with Lorain have been an “open book” to determine how to use the Block Grant and HOME funds for the Broadway Building, Louthen said.

“Where we stand today, is that our development team is working very diligently to address the development budget so we can complete our financing,” he said.

Lorain’s next move

It is unclear what would be the next step for the city of Lorain.

If City Council approves city financing, Mason said he would recommend Mayor Chase Ritenauer veto the legislation “because this is not a legitimate project.”

Mason said some city officials and residents may believe he opposes new businesses coming to Lorain.

“If I’m going to be the fall guy, I’m 100 percent OK with that because I’m confident in the paper trail that I have, even from HUD, saying that this project does not meet their requirements,” Mason said. “This is a joke.”