Harvey Stone, the former secretary of GRO-Warren, on Friday issued a statement commenting on the Department of Community and Economic Development fiscal monitoring report concerning a $500,000 grant-to-loan for the failed Allegheny Center for the Arts building project.
The fiscal monitoring report contained a number disbursements from those funds which the department contends were not allowed under the terms of the city's agreement with the DCED.
In his statement, Stone refers to some of those disbursements.
The full text of the statement follows:
GRO-Warren representatives met with the City of Warren staff prior to receiving the $500,000 loan. Although the funding came from DCED to the City of Warren as a grant, it was provided to GRO-Warren as a loan. Prior to receiving the first loan payment of $200,000, a meeting was held to discuss what the loan could and could not be used for. At that time, GRO-Warren was told by the City's representatives that as much as 18% of the loan could be used for Administrative Services and the rest could be used for any construction project related expenses.
GRO-Warren determined that it would use 15% for administration, 3% less than they were told could be used for that purpose. $30,000 from the first payment of $200,000 and $45,000 from the second payment of $300,000 was placed into the GRO-Warren account to be used for GRO-Warren's administrative expenses. Those expenses included salaries, office expenses and other administrative costs. The remaining portion was placed in a separate account owned by the Warren Business District Coalition (Main Street) to be used towards the project as that entity was the owner of the buildings.
First, payments were made to clear the debt on the building purchase. The City of Warren Redevelopment Authority, Northwest Savings and Christine Cheronis had all helped finance the purchase of the two buildings that were to be renovated and $115,434 was paid back to clear the financing.
A local architect, In-Scale Architects received $73,085 from the loan proceeds for the design of the building renovations.
Throughout the project period, GRO-Warren was asked to temporarily fund certain items to assist the City. GRO-Warren was asked to pay for the fountain that was sponsored by Northwest Savings as the City could not make that payment. GRO-Warren was assured that it would be reimbursed, so it went ahead and paid for the fountain used in the Streetscape project. Northwest Savings repaid that amount shortly afterwards.
GRO-Warren was asked to provide project management for the Streetscape Project. It was proposed that some of the funding coming from the City to help operate the non-profit could be used to provide the project management that the City did not have in its budget for the project. GRO-Warren provided Christine Cheronis as the City's project manager without any additional payment from the City.
GRO-Warren was subsequently asked to pay for removal of overhead wires at the proposed convention center as this had to be done prior to completion of the Streetscape project and there was insufficient time to put the project out to bid. GRO-Warren was told it would be reimbursed by either the City or the Convention Center project. GRO-Warren accommodated the City by paying Northwest Services a total of $162,737.
The ACA project had to be bid. The cost of the Newspaper advertisement was $805. This was required by DCED for the construction work on the project.
Eriez Construction was paid $12,000 out of the loan money. They were the contractor on the project. Early in the construction project, Penelec informed GRO-Warren that Penelec would have to install a new transformer for the ACA facility and that GRO-Warren would have to pay for it. A payment was made to Penelec for $10,536.
Of the $500,000 loaned to GRO-Warren, that accounts for almost $450,000. Taxes, insurance, utilities, and legal services complete the payments made out of the loan account.
As this was a loan to GRO-Warren at 4% interest, not a grant, it was understood that the money could be spent as GRO-Warren wished. Coming after the fact and finding that expenditures did not meet the guidelines that were never provided to GRO-Warren is like closing the barn door after the cows have gotten out.
No one was enriched by this project. Local support did not materialize and promised donations were not made. The state administration changed and the promised state funding did not materialize. It is not unusual to begin a project when all of the funding is not quite in place. Based upon past experience GRO-Warren believed that it had sufficient support to make the project a reality. GRO-Warren was mistaken and the project sits incomplete because of that.
GRO-Warren's board consisted of volunteers that tried to make a difference in the City of Warren. GRO-Warren tried to create a center for the arts in the City of Warren and was guilty of being too optimistic regarding local and state funding commitments.
Regarding the comments made by Dan Ristau in a letter to the editor that appeared on July 27th, the GRO-Warren Board negotiated an agreement with Eriez Construction that would have transferred the properties in question to Eriez Construction for them to complete and insured payment of the outstanding loans to both the City and the Redevelopment Authority. As the Warren Business District Coalition was the owner of the buildings, they had to be a party to the agreement. Mr. Ristau and his board refused to approve the agreement and the offer by Eriez Construction was withdrawn.
Harvey Stone, Former GRO-Warren Secretary