Stacy Bjorhus

Former Finance Director at city of coatesville

The City of Coatesville Redevelopment Authority (RDA) and the Downtown Revival Limited Partnership (DRLP) entered into an Agreement in 2002.

The DRLP proposed renovating 5 buildings on 4 Downtown parcels in exchange for a loan of $420,000 from the RDA. Repayment would be on a monthly basis through 2022. Repayment of the $420,000 loan would be paid in monthly installments equal to the amount that the RDA leased the ground floors of each of the DRLP renovated units. The RDA would be permitted to sub lease the ground floor units, which were Commercial Units, and create a revenue stream from the excess amount of the rent derived over the amount of the lease payments to the DRLP.

The DRLP obtained the $420,000 from the RDA (due in monthly payments), $500,000 from the City (due (0% interest) as a balloon payment in 2042, County Grant money and a loan from Wachovia Bank. In all the sum of money was in excess of five million dollars ($5,000,000). More than five million dollars was committed to the DRLP for renovation on five buildings in Downtown Coatesville. The buildings themselves were dilapidated at the time of acquisition by the DRLP and were sold to them at an insignificant cost.

There were multiple Agreements between the RDA and DRLP:

Revised Master Lease:

The Revised Master Lease noted the basic terms of the Agreement. The RDA had the right to lease the ground floor of the DRLP buildings (noted as the Commercial Units) and the DRLP would lease the Residential Units which were on the upper floors of the buildings. The DRLP would pay basic fees on behalf of the RDA (insurance, snow removal, property repair and maintenance on items not improved at the time of renovation, etc) and the RDA would pay the DRLP a monthly fee based on their share of the reimbursement of these items. The Revised Master Lease noted that at Year End there would be a ‘True Up’ of reimbursable services to be paid to the DRLP (if the monthly fees did not cover the expenditures to be shared), or a refund would be paid to the RDA is the True Up showed that the RDA had overpaid for reimbursable services in their monthly payments to the DRLP.

Co-Op Agreement:

The Co-Op Agreement stated the period of the Residential and Commercial Units operating periods. The $420,000 loan to the DRLP would be paid in full by the year 2022. At that point in time the DRLP, in writing to the RDA, could re-claim the rights of the RDA to sub-let the Commercial Units and cancel the RDA’s ability to lease the units and collect rent as a landlord, under the Sub Lease Agreement. The RDA could also, in writing to the DRLP, return the Commercial Units to the DRLP and be free of any further lease payments to the DRLP for the right to sub-let the units, or any of the ancillary expenses involved with the units.

The Co-Op Agreement also spelled out how the Residential Units and the Commercial Units would pay City, County and School District Real Estate Taxes on the buildings.

· Due to its mission of rehabilitating dilapidated housing units in the Downtown area, The Residential Units were given preferential taxation by the three taxing entities (City, County and School District)
· The Payment in Lieu of Taxes (PILOT) for the Residential Units was noted as a figure (my recollection) approximately $12,000 per year for tax year 2003, which would increase each year by 3%.
· The Commercial Units were not to be taxed until termination of the Agreement which was stated to be 2042.

Mortgage Agreement and Mortgage Disbursement Agreement:

The Mortgage Agreement and Disbursement Agreement noted the various phases at which the funding parties would reimburse the DRLP for construction costs, and they also gave the RDA the right to request any documents from the DRLP that would confirm the safety of the properties (tax payments, payments to billing parties (etc) the purpose of which was to confirm that tax liens and vendor liens would not undermine the RDA’s interest in the properties, and denigrate the RDA’s position with first priority in the Loan Subordination.

In 2011 it was determined that the DRLP had routinely billed the RDA for the Commercial Units share of the taxes on the properties. Apparently, the RDA paid the taxes to the DRLP or directly to the County in some cases (I was told) because the DRLP billed us (the RDA), and they wouldn’t have billed us unless we owed it.

At the same point in time the DRLP increased the Monthly Maintenance Fee on the Commercial Units by more than a 50% increase. The RDA was asked to pay for the DRLP’s staff salaries, staff benefits, training, electricity, and many other expenses that were not noted in the Revised Master Lease. The Revised Master Lease called for a Year End True Up, which would re-establish accurate Maintenance Fees due for the prior period and hence for the New Year. True Ups were never provided to the RDA and the RDA was operating in 2010 with the Estimated Maintenance Fee from the 2002 Agreement.

It could be established, based on a schedule of the County’s records of taxes paid on the properties that the RDA’s tax payments, in some years, were the only taxes paid for these parcels. The County noted that they (in 2011) would be willing to roll back to the original PILOT rate (2003) and begin increasing the figure by 3% in 2012 if the DRLP would agree to make the PILOT payments as agreed upon.

A review of the RDA’s vendor payments in 2005 showed tax payments directly to the DRLP, and other years the payments were either to the DRLP or to the County. The RDA held up the tax payments in 2010 when questions about the authenticity of the Commercial Units tax payment requirements came up. The DRLP denied and negated the Commercial’s Units tax free status; however the County Assessment Office confirmed that the RDA was reading the Co-Op Agreement correctly and tax payments were not due from the Commercial Units.

A review of the expenses that should be reimbursed to the DRLP by the RDA also showed that the Annual Maintenance Fees that should be reimbursed to the DRLP were in the $3,000 to $5,000 range not the $11, 000 to $12,000 that the DRLP had established.

My estimate of monies due from the DRLP to the RDA for periods 2003 – 2010 are approximately $6,600 for Maintenance Fees (based on a $5,000 reimbursement to DRLP each year – which by my estimate is on the high side. A more realistic figure appears to be in the $3,000 per year range), and approximately $60,000 due to the RDA for tax payments billed, but not due from the Commercial Units.

I had stopped paying the Maintenance Fee until a True Up for 2010 and prior periods was forwarded to the RDA, and confirmation of tax payments (copy of checks front and back) were submitted to the RDA. The Chairman of the RDA, after my termination in October 2011, began re-paying the Maintenance Fee to the DRLP despite the RDA’s insistence on being provided True Up from prior periods. I was told that neither True Ups nor confirmation of tax payments had been remitted to the RDA.

Has the RDA Chairman ceased requesting proof of the DRLP’s tax payments to the County for their share of the PILOT for prior periods? Has he failed to assert that the DRLP refund the RDA tax payments that the DRLP seems to have called their own?

The DRLP initially stated that proof of payment could not be provided because their records were at Iron Mountain and could not be retrieved, and later they stated that the RDA did not have the right to demand proof of tax payments on the parcels. The Mortgage Agreement / Disbursement Agreement gave the RDA the right to ask for delivery of any documents that would confirm the security of the properties.

Why did the RDA Chairman back off from demanding repayment of more than $60,000 due to the RDA from the DRLP?

The RDA’s sustainability, as an entity, is in a critical cash position and the DRLP refunds which are due to the RDA could sustain the RDA for two more years until the RDA could hopefully develop the Flats and the Train Station.

Why did the DRLP present the RDA payments as payments for the DRLP properties, in some cases?

Why isn’t the RDA Board holding the DRLP to the Agreements signed in 2002?

The RDA Board and the RDA Solicitor were well informed of the DRLP’s obligations in these regards, but they backed off of insisting upon True Ups, per the Revised Master Lease, and proof of DRLP tax payments (and RDA refunds for taxes paid) when I (Finance Director of the City and the RDA) was severed by the City. Why?