THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: FRIDAY, June 3, 1994 TAG: 9406030701
SECTION: LOCAL PAGE: D1 EDITION: NORTH CAROLINA
SOURCE: BY LANE DeGREGORY, STAFF WRITER
DATELINE: 940603 LENGTH: WANCHESE
King Crab Seafood Co. owner Buddy Midgett, 41, owed the seafood park $13,524 in back rent and $384 in water bills at the time of his eviction, seafood park Director Rodney W. Perry said.
{REST} Midgett acknowledged he had not made a payment on either of his 2-year-old loans before being evicted from the warehouses.
``I chose not to pay the rent on purpose. And I haven't received any requests for payment on those loans yet,'' Midgett said last week. ``But I will file suit over the damage I've incurred through this eviction, which is now well into the $5 to $10 million range.
``King Crab Seafood Co. is the one that's been damaged here,'' Midgett said. ``Not the seafood park.''
State officials disagree. And some local watermen have criticized state and county officials for their inaction in recouping the loan.
``The state of North Carolina and the Seafood Park Authority have bent over backwards to accommodate Buddy and his business,'' Perry said. ``He has not paid rent since November 1992. And he's done a lot of business over there shedding crabs.''
Midgett has been threatening to sue the park for more than two years, Special Deputy Attorney General T. Buie Costen said Wednesday in Raleigh. ``We still haven't seen any paperwork from him.''
Midgett moved into the park in May 1992. With a $340,000 loan from the state's Community Development Block Grant program and a $265,000 note from the North Carolina Rural Rehabilitation Corp., he bought two trucks, hired six employees and planned to have his operation ready for the start of the spring softshell season.
But the seafood park wasn't ready for Midgett.
The $8.1 million state-owned facility was built in 1981 with the hopes of jump-starting Wanchese's financially foundering waterfront. Its $1 million wastewater treatment plant was designed to treat 270,000 gallons of waste a day from seafood processors. King Crab projected it would generate about 25,000 gallons a day. But the plant couldn't operate on such a small stream.
So although Midgett could begin shedding crabs, seafood processing had to wait.
``The park's wastewater plant was two years behind in being ready for us,'' said Midgett, a Manteo resident. ``The only reason we weren't operating at full capacity is because the wastewater treatment plant couldn't accommodate my business.''
After spending an $81,000 federal Farmers Home Administration grant and $102,000 in state funds to get the plant running, seafood park officials finally told Midgett he could begin processing crabs in August 1993.
But by then, Midgett said, he had spent all of his operating capital and could no longer gear up the crab picking business.
``The park did not perform according to its lease,'' Midgett said. ``They just dropped the ball.''
State departments granted both of Midgett's loans. But the money all came from federal funds. Dare County also got into the act when commissioners agreed to administer the Community Development Block Grant for the state.
To offset problems caused by the seafood park's non-functional wastewater treatment plant, state officials in charge of the block grant program agreed to let Midgett defer payments on his $340,000 loan for one year. Dare County commissioners extended the no-pay period another year in March 1993. His first payment - interest only - was due to the county in May.
``Since the county is administering that loan, it's up to their attorney to pursue any legal alternatives against Mr. Midgett or to recoup any equipment which may have been collateral,'' said Robert Hinshaw, project finance officer for the state's commerce department, which issued the 15-year block grant loan.
``Technically, the county is responsible for the money,'' Hinshaw said. ``If there's remaining equipment left, the county should, in fact, take possession of that and sell it to recover any proceeds they can.''
County Attorney H. Al Cole Jr. said that was news to him.
``I didn't think it was our place to bring any legal action or try to recoup that loan,'' Cole said. ``We haven't planned to pursue anything so far.''
County Finance Director David Clawson said he contacted Hinshaw to ask for instructions about pursuing the loan. But as of Wednesday, he had not yet received guidance about how to recoup the $340,000.
According to the original loan agreement, the state's commerce department holds a lien on two new buildings which Midgett constructed at the seafood park.
The Rural Rehabilitation Corporation, which issued the second state loan, holds the lien on Midgett's third building. On Tuesday, officials from that department paid about $8,000 in back rent which Midgett owed the seafood park for the warehouse. Perry said he will work with the rehabilitation corporation to find a new tenant for that space.
On his original loan applications, Midgett said he planned to spend about $42,000 for equipment. He took all of the machinery with him when he evacuated the seafood park. But on Tuesday, he repaid the rehabilitation corporation $15,000 - proceeds which he said he received from selling the equipment.
``It is unusual to default on a loan like this,'' said Alex M. Lewis, a trustee for the Rural Rehabilitation Corp. in Raleigh. ``You always worry 'til the thing's finally settled. But we're not overly concerned at this time.''
Perry said he, too, was not concerned about recouping Midgett's back rent. Pursuing that amount of money, he said, would not be worth the state's time.
Midgett said he has no plans to repay the park. But he said he ``accepts responsibility for all the money we borrowed'' from the state. The threatened lawsuit, he said, would help alleviate those debts.
``If those loans aren't repaid,'' Hinshaw said, ``the loss ultimately will be borne by the national government - the federal taxpayers.'' by CNB