Marta Mossburg: Fancy restaurants should not be on the government's menu
By: Marta Mossburg
Examiner Columnist
August 18, 2009
At a time when Gov. Martin O'Malley plans to cut $250 million for police, schools and roads throughout the state, why are taxpayers launching fancy restaurants, remodeling a luxury inn in Easton and launching a Bikram yoga studio in Takoma Park?
According to data from the state Department of Housing and Community Development, Maryland taxpayers have loaned almost $12 million to high risk businesses including $500,000 to Caitec Corp. in Baltimore City, which offers a "complete selection of products for companion birds."
Also on the list are restaurants, bakeries, catering businesses, and most famously, the now defunct Senator Theatre in Baltimore City which cost state and local taxpayers millions. The department also made over $10 million in grants to cities and development corporations to revitalize communities in the same time period.
According to the department, $2.6 million of the loans are delinquent - 22 percent of the total. Since it's unclear how the department calculates delinquent loans and whether it writes them off after a certain time period, that number could be higher. Information released on the grants contains no information on the status of the funded projects or if they were even started.
DHCD says the terms of the loans are private. An agency lawyer defended DHCD's lack of transparency by declaring that public money is the same as private funds and therefore can't be disclosed. Despite his claim, public money is public - the only issue is why DHCD must go to such great lengths to hide its records.
DHCD said it did not have a document "in existence" that showed how many loans it modified, but that it would be happy to create one for me for a fee. If the agency acts as a bank, wouldn't it behoove them to know which loans on its books are in trouble in one easy-to-monitor spreadsheet?
None of the records released by DHCD contained information on the status of the loan or the loan interest rate extended to each recipient. The information also lacked a description of the purpose of the loan or why the business could not obtain a private loan.
And the agency would not release information on the total number of loans it has modified for recipients unable or unwilling to pay them back. That can only raise questions about whether political favors played a role in extending them.
A March 2009 audit by the state Department of Legislative Services shows that DHCD extended an additional $378,000 in 2005 and 2006 to Tom Kiefaber, then-owner of the Senator Theatre in Baltimore City, when he had already defaulted on the agency's original loan of $385,000, begging the question of whether other people received the same favorable treatment. What's clear is that no bank would ever have given someone such a deal.
One other likely default includes a $250,000 loan extended in 2005 to Pazza Luna, an Italian restaurant in Locust Point, a neighborhood in Baltimore City. News reports show the restaurant was sold in 2005 to Dennis and Sandra Dee Stallings and closed and put up for auction in 2006. An Oct. 14, 2005 report in the Baltimore Business Journal said that Dennis worked in real estate and that his wife had never owned a restaurant before but "always wanted to."
I've always wanted to own a Porsche 911, but it does not mean that Maryland taxpayers should buy it for me.
Another loan that raises a flag is $475,000 to "Jason's" in Baltimore City. A Google search shows numerous businesses with Jason in the name in the region, so it is impossible to identify.
In order to get any information, I had to make an official public information act request because it is not on the agency web site. If Malley supports transparency in government, he must hold the Department of Housing and Community Development to the same standards he regularly champions in the media and for which a national organization recently gave him an award.
It is especially important in the case of DHCD, an agency which the Department of Legislative Services shows has a decade-long track record of poor financial management. It's also an agency overseeing millions from the American Recovery and Reinvestment Act. Maryland taxpayers need good stewards of their money, not make-a-wish fulfillers for a favored few.
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