To forgive, or not to forgive


That is the question currently facing Minneapolis officials regarding a half-million-dollar loan to the Northside Residents Redevelopment Council. The answer could determine the group’s ability to continue serving the community.

First of a two-part story

The 23rd floor conference room of the Hennepin County Government Center was packed the late afternoon of August 27. Sitting at tables aligned in a horseshoe pattern were members of the Minneapolis Neighborhood Revitalization Policy (NRP) board. Standing behind them, some forced to lean against the walls, were top officials and supporters of the Northside Residents Redevelopment Council (NRRC).

Both parties were present for the top agenda item that evening, a NRRC request for NRP to forgive a $502,000 deferred loan the group first borrowed in 1996, along with two other loans of $338,000 and $115,000 borrowed that same year. All three loans involve the Plymouth Penn Shopping Center in North Minneapolis, a 22,000-square-foot retail building that NRRC has managed since 1995.

The Center was originally developed in the 1980s on land cleared by the City as part of post-1960s urban renewal plans. After it changed hands several times and ended up in tax foreclosure, the City in 1995 requested that NRRC manage the property. NRRC then borrowed money from NRP to help the organization fix the Center’s leaky roof and meet other operation costs.

Calling the property “a lemon,” NRRC Executive Director Sherrie Pugh Sullivan said that difficulty keeping long-term tenants is among the many problems her group has found in operating the shopping center.

NRP is now calling for NRRC to pay off the $502,000 after missing an August 1 deadline to bring the loan current. “This is not the first time defaults have occurred with this loan,” said NRP Director Robert Miller, who introduced a motion to reject forgiveness of the loan and seek full payment.

NRRC officials, however, explained why NRP should forgive the loans. Sullivan said it has been hard for NRRC to make payments and also operate the shopping center.

NRRC board member Mark Masica added that they were assured by City officials on July 11 that the loan would still be forgiven even if it went into default. “I thought we were all on the same page at that July meeting,” he said, adding that he was told that the default was “just a formality.”

“There were a number of questions repeatedly asked in the [July 11] meeting,” Sullivan recalled. “I asked does NRRC need to worry about the August first [default] date. The response was, ‘We can push back the date.’”

Minneapolis City Councilmember Don Samuels, who facilitated the July 11 meeting, said that no assurances were given but told NRRC that he would support their forgiveness request. “I have to stay neutral” as a city council member, he pointed out.

Charles Lutz, deputy director of the City’s department of Community Planning and Economic Development (CPED), also said no assurances that the loan would be forgiven were ever made at the meeting. “I think there was a misunderstanding,” he added.

Sullivan, in an August 23 memo, told NRP that NRRC met with City staff in the fall of 2006 and again this past May, specifically to discuss forgiveness of the loan. Secondly, she stated that there have been overdue and unpaid payments in the past due to problems with the shopping center, and NRRC had never received a default notice for those.

Finally, Sullivan said that among those who attended four community meetings held this past spring to discuss the University of Minnesota’s plans to purchase the shopping center, including City staff, “All assumed that the $502,000 would be forgiven.”

However, Miller said that NRRC was fully aware that the half-million-dollar loan was subject to default if payments were not kept up to date. If the loan was up to date, forgiveness then would be given, he added, noting that the organization has not made any payments since February, and that covered only payments that were due through November 2006.

In her memo, Sullivan also questioned why NRP chose “exactly 30 days before the $502,000 loan is to be forgiven” to send out a default notice.

Miller said that NRP is not a financial institution but must perform its fiscal duty. “Had we been a bank, we probably would have [called in the loan] at least twice in the last 10 years,” he noted. According to him, NRRC has been late with payments over 60 percent of the time: “That loan has not been paid in a timely manner. We have bent over backwards and did everything possible to make the shopping center successful. We have rewritten these loans three times.”

Masica said problems keeping tenants is a reason for the late payments.

No matter what City officials may or may not said, “They [NRRC] should have asked [us] what position we would take in regards to forgiveness to this loan,” Miller said.

Both Sullivan and Masica said that if they knew NRP would not grant them forgiveness on the loan, they could have gotten “bridge financing” to fully pay it off. “I could have gone to [other] lenders who told me that if I had a purchase agreement from the ‘U’, they would loan us the money to pay off the City loan,” claimed Sullivan.

However, MSR obtained a copy of a June 27 letter Lutz sent to Sullivan stating that if the loan was not current by July 31, NRRC would not be granted forgiveness. “We were absolutely clear,” said Lutz.

The NRP board members debated for over an hour on whether to forgive the loan or not. Board member Mark Hinds said he supported NRRC’s request but expressed some misgivings. “I think it is a real bad precedent to set,” he admitted.

NRP eventually approved Miller’s motion not to forgive the NRRC loan, but also passed an amendment for a 30-day period so NRRC and NRP can work out an agreement on the default- ed loan. “I think that this is a better course of action,” said Hennepin County Commissioner Peter McLaughlin, who authored the amendment.

But with all the recent misunderstandings and miscommunications, can NRRC and NRP work things out? “I certainly would hope so,” said Sullivan. “I am assuming that we can get this resolved.”

“I think we can find a resolution that meets everybody’s needs,” said Minneapolis Park and Recreation Board President Jon Olson, an NRP board member.

Said Miller, “Our attitude towards NRRC always has been to try to do everything we can to make them successful.”

In addition to the NRP loan, NRRC also has other outstanding loans, including $110,000 to the Local Initiatives Support Corporation (LISC); $254,831 to the Nonprofit Assistance Fund, and $300,122 to Greater Minneapolis Housing Corporation (GMHC). Most of this money went to other NRRC ventures such as building homes in Heritage Park, Sullivan said.

Pending approval by the Board of Regents, the U of M has agreed to purchase the shopping center for approximately $1.1 million. Sullivan said her group hoped to use the money from the sale to pay off its lenders and creditors, and getting the NRP loans forgiven would make that easier. Failing to do so “would make life difficult,” she added.

Despite the current loan situation, NRRC remains committed to improving the economic life of Minneapolis’ North Side, claims Sullivan. “NRRC is about community,” she concluded. “We are a nonprofit [organization] that represents the African American community.”

Next week: More on the proposed shopping center sale to the University of Minnesota.

Charles Hallman welcomes reader responses to