October 21, 2021

City to write off $774K in old state, federal loans

The Cortland Common Council voted, 6-1, Tuesday to write off more than $774,000 in delinquent state and federal housing and economic development loans, some dating back to the 1990s.

Alderman Troy Beckwith (D-7th Ward) voted against the measure; Kathryn Silliman (D-2nd Ward) was absent.

City Attorney Ric VanDonsel said the loans had been delinquent for years and all of them were past the statute of limitations allowing the city to collect

on them, meaning the city couldn’t collect them even if it wanted to. Most of the loans preceded the current administration, he said.

“At this point, we have to face reality and clear them off the books,” VanDonsel said.

The city will write off:

  • $548,000 worth in U.S. Department of Housing and Urban Development, or HUD, economic development loans.
  • $39,000 in HUD housing loans.
  • $89,000 in state Office of Community Renewal housing loans.
  • $98,000 in state Office of Community Renewal economic development loans.

A bankrupt company, Envirogear, was the biggest single recipient of these now-delinquent loans.

The company, which manufactured specialized outdoor camping equipment, had two outstanding HUD economic development loans totaling $290,000.

Beckwith wanted to know why the loans were only being dealt with now.

“Why wasn’t action taken sooner?” he asked.

VanDonsel said past councils and city attorneys had passed the delinquent loans along without taking action.

Some of the loans became delinquent because the companies involved went bankrupt, said Linda Armstrong, program manager for Thoma Development Consultants, which handles applications for housing and economic development loans for the city. Envirogear was one example, she said.

“When they finally went under … there was nothing to go after,” she said.

Many of these loans, she said, are considered high-risk and foreclosures and bankruptcies are to be expected. But for the most part, the loans help homeowners and businesses and get paid back, she said, a finding past audits bear out.

“There were many, many, many more good loans than there were bad loans,” Armstrong said.

Beckwith, however, said the city needed to keep a closer eye on future loans to prevent delinquency.

“In today’s day and age, we’re just going to have to crack the whip,” Beckwith said.