HUD has its say about DLDC funds

The city of Dunkirk is not alone in feeling the scrutiny of the federal Department of Housing and Urban Development.

The Dunkirk Local Development Corporation board of directors met Wednesday and heard its ability to provide financial help to small businesses is still on hold.

With five of the 10 members present to provide the needed quorum, the DLDC heard Development Direc-tor Steve Neratko report the DLDC will need to repay the full amount of the loan the Clarion Hotel received some years back, and recently repaid.

HUD will be notifying the DLDC soon as to how that repayment will be set up.

“They mentioned that the board should be aware of that. We are looking into our options there. We should receive a letter from them in the next month,” Neratko explained.

“Another issue with the HUD program the DLDC has had is going back, I’m sure a lot of you are aware, we’ve talked about it quite a bit, going to back there were two sets of loan funds. There was the HUD fund and what the city considered a non-HUD fund.

“In the review that HUD did there was a commingling of funds without a real decisive answer on where the original funds came from that were not HUD funds. The loans that were given out that we’ve always termed non-HUD loan funds, those have come from a revolving loan program that comes from funds from previous paid loans, but the issue is where that original loan money came from.”

Neratko went on to say the lack of records regarding the origination of funding will result in the DLDC’s loans having HUD attachments going forward.

“There’s some work we have to do in terms of how we categorize them, some paperwork we’ve got to put in the files just to make sure that in the future when someone looks at the file they know what happened,” he explained. “There won’t be an impact, or there shouldn’t be an impact, on the current loans, but once the loan funds come in they will automatically be considered HUD funds.”

Councilwoman-at-Large Stephanie Kiyak also serves on the DLDC board.

“How far back are they looking to say if you can’t show the origination it’s now designated HUD?” she wanted to know.

“As far back as you can go. Some of these funds have been with the DLDC for quite a few years,” Neratko replied. “There’s no way for us to provide them the documentation we need to show them these new funds should be kept separate. The funds have been commingled for so long that there’s just really, we haven’t been able to come up with a way to untangle the mess.

“There shouldn’t be an impact on the current loans other than the fact when those funds come in they will be put, placed in the HUD account and they will be available for future economic development use once HUD allows us to do that again. For now, they would just accumulate in a HUD fund and at some point the DLDC will have some funds to spend on HUD-related projects.”

Board member Judy Presutti sought some clarification.

“Did funds get mixed up with CDBG stuff, is that what we’re talking about?” she asked.

Neratko replied that CDBG was what he was referring to as HUD funds.

“Going back quite a few years the HUD loans went into the HUD account direct. There was a few things going on, but for the most part the funds were just commingled, there was no separation,” he continued. “So due to that, we don’t have any recourse at this point. It’s a federal regulation if that does occur; all the funds have to be accounted for as CDBG funds.”

Kiyak noted the responsibility was on the DLDC to prove other wise and the board can’t.

“We have tried,” Neratko added.

After the meeting Neratko said his department searched for paperwork on the origination of some of the funds.

“There are no records regarding where these funds came from, we looked back as far as we could. It all depended, it was on a loan-by-loan basis, some were renegotiated and wrapped back in. Obviously there was money to give out loans, but where it originated from is not available,” he added. “There are a couple of pieces of paper from the early 90s, the further back you go the less you have. Going back, before I got here they didn’t have a lot of documentation, that’s why we’re having to repay some of this, we don’t have records of anything.”

According to Neratko, for the Clarion payback, the DLDC owes $153,000, which includes the full amount of the loan and a grant. The loan repayment was a little more than $126,000, leaving some $27,000 for the DLDC to come up with.

Send comments to gsnyder@observertoday.com