ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, September 5, 1996 TAG: 9609050067
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
SOURCE: DAN CASEY STAFF WRITER
SOME ROANOKE officials say they probably will vote to forgive the loan for the Henry Street Music Center, though there is concern about the city setting a bad precedent.
Roanoke is considering forgiving a $212,000 loan it made to Total Action Against Poverty for asbestos removal at the Henry Street Music Center because the community action agency has no way of paying it back.
City Manager Bob Herbert briefed City Council privately on the loan Tuesday after council's regular meeting. On Wednesday, Herbert said he intended to recommend that council take formal action to forgive the loan at its next meeting, Sept. 16.
The money lent to TAP came out of federal Community Development Block Grants the city receives each year. The funds already were targeted toward Henry Street revival efforts before TAP asked for them.
The city made the no-interest, unsecured loan to TAP on Feb. 5, 1990, as a deadline approached for TAP to use or lose a $600,000 federal grant to restore the old Dumas Hotel and turn it into the music center.
The agency needed the additional money to remove asbestos that was discovered in the three-story building. Without it, TAP would have had to forfeit the federal grant.
Originally, the loan was to be repaid in two years, but in 1992, TAP was granted a five-year extension. It is due early next year.
"We have not made payment on the loan," TAP Executive Director Ted Edlich said. "We've not been able to. The only money we have is grant money to operate programs for low-income folks."
TAP knew when it applied for the funding that chances were slim the agency could ever repay the loan, he said.
But "we were at the point where we could have said, 'Look, the loan is just not a possibility,' and sent the $600,000 back to [the federal government]," Edlich said. "So we took the money and figured we'd work it out later. I think it was a good call."
Despite years of talk and various plans to turn Henry Street into an entertainment district, the music center building is the only structure that has been preserved on the historic street.
The agency rents the facility out for meetings and musical performances. TAP also operates a kitchen in the back of the structure, preparing 700 meals each day for children in the Head Start program.
The city learned in 1992 that the loan would probably not be repaid, Herbert said.
If it occurs as expected Sept. 16, council's forgiveness of the loan is likely to have some strings attached. Herbert said he would recommend:
* That TAP return to the city 26 percent of gross revenues from the music center for five years, beginning with the date the loan is forgiven.
* That TAP report annually on the number of jobs created by the music center. That's because when the loan was made, the music center was classified as a job-creation and economic development project.
* That the city and Henry Street-related committees be able to use the music center for meetings without charge 12 times a year. Although it could, TAP isn't charging the city for use of the building. Herbert said he wants that understanding on paper.
* That TAP agree not to apply for more community development money for the center.
* And that TAP agree to further develop the music side of the center.
To some extent, the agency has the city in a difficult situation because the loan is unsecured. Herbert said a decision was made early on not to attach the loan to the building, which is unfinished and could require up to $1 million in additional investment.
Even if the city could take title in a collection process, all it would get is a building with a tenant that can't afford the rent.
Council members contacted Wednesday predicted council would reluctantly go along with forgiving the loan.
"What else can we do?" Councilman Jack Parrott said.
"As far as I'm concerned, if the debt is to be forgiven, that should not happen again," Councilman Carroll Swain said. "I won't advocate this in the future, particularly with Total Action Against Poverty. It should be a self-sustaining outfit, particularly with the money they now get. The city is providing enough already. We can't afford to do this with other organizations."
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