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Wilmington treasurer says failed Housing Partnership owes city $3.4 million in loans

Jeanne Kuang
The News Journal

A cash-strapped Wilmington housing nonprofit has failed to pay interest on $3.4 million in loans from the city, Wilmington treasurer Velda-Jones Potter said Wednesday, exposing the city to potential liability. 

Jones-Potter said the Wilmington Housing Partnership has not been making quarterly interest payments since last June on the loan it took out from the city in 2013. The city issued bonds that year to help fund the organization and Jones-Potter said she is concerned the city's credit will be damaged.

Wilmington Treasuer Velda Jones-Potter

Her office in December put the organization on notice for the lack of payments, she said in a news release.

The nonprofit is a public-private partnership funded partially with city funds. It takes blighted properties and rebuilds them to sell as affordable homes. 

Last month, Mayor Mike Purzycki announced the city was taking over the nonprofit's two current construction projects and 150 extra properties. The partnership had run out of money after buying too many properties and finding private funding coming up short.

How a Wilmington housing nonprofit went broke

Jones-Potter said she was concerned a city auditor's review of the organization's finances, released last month, did not mention the $3.4 million that the partnership owed.

The audit found financial missteps, poor tracking of transactions, a shortage in expected private funds and the misuse of city grants. 

The auditor's report stated the organization owed the city $185,000 in unpaid loans.

City auditor Terence Williams said his review only covered financial transactions from the summer of 2017 through last year, and the loan was not apparent from the information he reviewed. He said he has told Jones-Potter the scope of the audit was limited.

"She's aware of everything but she still wants to put this stuff out there," he said.

Jones-Potter's news release came a week after the News Journal filed a public records request for correspondence about the $3.4 million between her office and Purzycki's. That request is still pending.

The treasurer said her office has paid $90,000 of the partnership's interest payments to avoid the city defaulting. She is seeking legislation from City Council that would allow her office to pay off the loan before it matures in September.

She said she has not heard back from the administration on how it will get the funds from the partnership.

"My proposal is that we clear this obligation and then as the partnership makes its decision and develops its plans for the disposition of property assets, the city recoups what's owed," she said. 

Purzycki and City Council finance committee chair Bud Freel both said they are asking Jones-Potter to wait.

"The proposal is premature and not in the best interest of city taxpayers, especially given that the Administration is negotiating with the creditors of the agency," Purzycki said in a statement.

Contact Jeanne Kuang at jkuang@delawareonline.com or (302) 324-2476. Follow her on Twitter at @JeanneKuang.