More than $16 million in loans given to private businesses from the city’s largest economic development loan fund is missing, according to internal city documents.
A summary of the city’s Urban Development Action Grant program shows that only $2.35 million out of $26 million from one particular round of loans has been repaid. Another $7.3 million being actively repaid, adding up to $9.6 million in loan funds that are accounted for, less than half than the amount that went out to businesses.
But what doesn’t show up on city books is nearly $17 million that went out and never came back, according to the April 2010 summary prepared by the Office of Community Development. The report was created at the request of City Council President Arnie Fielkow, who has consistently called for more transparent accounting of the fund.
The Urban Development loan fund is the city’s largest pot of cash earmarked for economic development.
The money dates back several decades to a U.S. Housing and Urban Development Department program that aimed to foster commercial development in blighted urban areas. The program relied on city governments to pass the money onto qualifying businesses in loan form and then recapture the repayments to be used again. New Orleans received a total of $36 million through the program before it was discontinued in the late 1980s, according to the summary.
Nearly all the money that came in through the program successfully made it through a first round of loans in the 1980s with $33 million returning to the city to be recycled into a second generation of loans or used for grants, which are also allowed under HUD regulation.
For New Orleans, the second generation of loans is where the problems seem to have arisen, with the missing $17 million representing a large chunk of the $26 million in loans the city eventually gave out. In addition to the $9.6 million in accounted-for second-generation funds, the city has another $3.7 million in fund. That money comes from the $33 million that was repaid to the city after the first round of grants.
As the city faces a $62 million budget shortfall, the missing $16.7 million is “extremely significant” Fielkow said Tuesday.
He leads the council’s Budget Committee, which meets Wednesday to discuss necessary budget cuts.
“There needs to be a sense of urgency on this $17 million in undocumented loan money,” Fielkow added. “Strategically this money could be used in a number of ways to leverage new business and grow the city’s tax base.”
But before the city can use the money, it must find it.
Deputy Mayor of Facilities, Infrastructure, and Community Development Cedric Grant told the council at a Budget Committee meeting last month that he was examining the loan records in effort to figure out how much, if any, of the money the city can expect to recoup.
He said he would come back “with a complete list of which defaulted and which we are still having minor collections on.”
“I think I can have that report back to you prior to the next budget committee meeting,” Grant said.
Grant is not on the agenda for Wednesday’s meeting, and a spokesman for Mayor Mitch Landrieu said there were no updates as of Tuesday on the fund report.