GoLocalProv News (Rhode Island) - by Dan McGowan
On Monday, GoLocalProv reported that 25 percent of all PEDP loans (totaling more than $3.3 million) were at least 90 days past-due and the organization was actively seeking collection against 11 delinquent companies. A day later, the website reported that a recycling company based in South Providence received more than $700,000 in loans from both the city and the state in addition to federal grant money before going into receivership early this year.
Now, former Providence Review Commission Chairman Ken Richardson is raising concerns over a $500,000 PEDP loan that went to the city to help with the construction costs of the $3.77 million Bank of America Skating Center (formerly known as the Fleet Skating Center). Richardson says the rink has struggled to remain profitable after opening to wide praise in 1998, something he predicted was likely to happen.
Debt Wasn’t Being Paid
At the time, the PEDP was known as the Providence Economic Development Commission, but its goals have remained the same for as long as it has existed: to provide loan money to businesses that are turned away from borrowing by banks.
Funds are allocated to the PEDP through Community Development Block Grants (CDBG) by the U.S. Department of Housing and Urban Development.
The Bank of America Skating Center has come to be a landmark in downtown Providence, but a former Chairman of the Review Commission is saying taxpayers were misled about the cost of the rink by the Buddy Cianci administration and then left on the hook when the city converted a Providence Economic Development Partnership (PEDP) loan into a grant.
But the feds approved the city’s decision to loan itself the money because it was intended to benefit communities across the city. The city also received a $1.8 million loan from Fleet Bank, which was supposed to be paid back using profits from the rink.
But PEDP Executive Director Thomas Deller says the loans weren’t being paid back in the years that followed and in 2009, while Congressman David Cicilline was Mayor, the PEDP loan was simply converted into a grant. Deller said this was not unusual.
“PEDP occasionally changes a loan to a grant,” Deller said. “It was done for the skating rink as part of the restructuring of debt that was incurred by the Cianci administration. Neither the Bank of America debt or the PEDP debt was being paid. BofA took a haircut and PEDP converted its loan to a grant.”
The Providence City Council, which allocates federal CDBG money, did not vote on converting the loan to a grant.
“Once funds are allocated to PEDP by the city council, just like any other nonprofit, the funds are managed in accordance with the directions of the nonprofit board,” Deller said.
They Knew What was Going to Happen
But Richardson, who argues that the support behind building the rink came in part because it was supposed to be paid for using all private dollars, maintains that by converting a loan to a grant, taxpayers were forced to contribute.
“They knew they were never going to pay back that loan,” Richardson said Tuesday.
Richardson led the charge at the time to learn more about the long-term financial projections of the skating rink, but he was turned away by the Cianci administration and the City Council. He says he always questioned the rink because he knew from personal experience growing up as a hockey player how expensive ice rink operations can be.
“The Providence Review Commission raised concerns many years ago about the ice center sustaining itself on its own revenue stream,” Richardson said. “Time, I suppose, proved us right.”
Misleading the Public
But Richardson’s criticism fell on deaf ears and the skating rink was touted as a centerpiece for the redevelopment of downtown Providence. It remains a popular destination for residents of the city and families visiting Providence throughout the winter. During the spring and summer, it becomes a skate park and concerts are often held at the venue.
But Richardson said converting the loan to a grant proves the city hasn’t generated enough revenue over the years. He claims the Cianci administration misled the public and the Cicilline administration used the grant to plug a deficit.
“I believe the administration at the time misled the PRC, the City Council, and the public by saying that no taxpayer funds will be used to construct the ice rink,” Richardson said. “By converting the PEDP loan to a grant, they created non cash revenue for the City by way of debt forgiveness and probably helped plug an expected budget deficit at the time. And by their actions admitted what the PRC and some City Councilors at the time thought were unrealistic long term projections.”