Monday, April 2, 2012

The Northeastern Building- HCA's Continuing Saga

At a recent board meeting  of the Hazleton City Authority board members were reminded of a decade old award stemming from a lawsuit involving the HCA and the Markle L.P. partners.  This saga is a tale of twisted decisions and questionable actions on the part of HCA officials as well as former Mayor John Quigley.  What is interesting is how much of this information never made it to the media.  A search of the Standard Speaker files located at the Hazleton library failed to provide a record of all of the dealings.

Why would such a story be relevant today?  Ratepayers of the HCA funded a loan received from the Office of Community Development of the City of Hazleton on December 18,1995.  As reported the Hazleton City Authority has an outstanding award in the amount of $250,000.00 as a result of that loan that was never collected in the seventeen years since.  The ratepayers are still on the hook for the money.

In the forthcoming series SOP is going to produce documents never made public before in an attempt to highlight the reason why Open Records is a necessity.

In a letter dated to Sam Monticello, Hazleton City Community Development officer, dated April 10, 1995 the HCA Industrial Division (HCAID) requested a $750,000 loan with an interest rate of 5% for a term of 15 years.  Board Chairman, Norbert O'Donnell also requested that the first two years of principal and interest be waived.  The desire at the time was to save the Northeastern Bank Building located in downtown Hazleton from continued deterioration.  The building was owned at that time by Dr. Gerald Andriole.

Dr. Andriole engaged the services of CECO Associates, Inc. to "conduct and inspect the structure to develop a proposal to the required professional services associated with installing the REQUIRED improvements so the compliance with the orders in the January 11,1994 correspondence be obtained."

Al Magnota, P.E. and Vice President of CECO Associates wrote this conclusion in that letter.

"Based upon the approval, the potential financial committment to acheive compliance with the said Orders in the January 11, 1994 correspondence would be approximately $1,400,000.00 including a 15% allowance for design and inspection services.  In my view this amount is significantly above the market value of these structures.  In addition you will lose net rentable space due to providing direct access to the fire rated second access from the eleven story building, not to mention the relocation and replacement costs from existing tenants you will incur.  Finally, I would doubt that the installation of the subject improvements will correspondingly increase the market value of the building and/or your ability to recoup your investment through increased rental charges.

Recognizing your commitment to installing the proper improvements that are feasible, I would suggest that a meeting be arranged with proper officials of Labor and Industry to determine which Orders can be vacated via the historic designation of this building and which improvements must be installed in order for an Occupancy Permit to be issued."

In March 16, 1995 Louis Valentas, Vice President at PNC Bank, wrote a letter to Norbert O'Donnell, Chairman, HCA, informing the HCA that a loan facility in the amount of $500,000.00 would be provided to the borrower, the HCA.  The interest rate would be 6% per year and payments would be made in equal installments of $4,220.00 over sixty months , based on a one hundred eighty (180) month amortization with a SUBSTANTIAL BALLOON PAYMENT due April 30, 2000.

According to the Business Development Loan Program (BDLP) Agreement the HCA listed the total project cost at $2,000,000.00(more on this later).  The HCA sought $250,000.00 from the BDLP as part of the financing needed for the entire project.  It was clear from this agreement that the $250,000.000 BDL "shall be used for the physical improvement of the structure."

There are inconsistencies in the application by the Hazleton City Authority Industrial Division to the City of Hazleton for a Enterprise Zone Business Loan Development Program dated April 10, 1995 with a request made later in the year.  On the Financial Request page the HCAID lists the following expenses:
Acquisition         $335,000.00  * (under negotiation)
Leasehold Improvements  $2,004,000.00
Architectural Fees      $140,000.00
Financial Fees       $6,000.00
Legal Fees            $10,000.00
Other                    $165,000.00
Total Project Cost   $2,660.000

However in a subsequent document, the Business Development Loan Program Agreement dated December 27, 1995 the total project cost is listed as $2,000.000.00
Private Debt Financing    $1,000.000.00
Private Equity                  $ 750,000.00
Business Development Loan Program (BDLP)  $250,000.00
Total Project Cost     $2,000.000.00

The first application was signed by Norbert O'Donnell, Chairman and Richard J. Ammon, Secretary and Treasurer.  The second agreement executed December 18,1995 was signed by Norbert O'Donnell, Chairman.  In less than a year the total project cost drops by $660,000.00 and nobody questions it.

In this document it is important to note that the $250,000.00 was specifically earmarked in item 1. for the Developer to perform:

Improvement of the fire safety system as per PA Dept of Labor and Industry and City of Hazleton Codes

On October 27, 1995 the Hazleton City Authority purchased the Northeastern Building from Northeastern Realty Inc. for the sum of $390, 321.95 according to a deed filed in the Recorder's Office of Luzerne County Book 2544 page 666 on October 31, 1995.  It is interesting to note that the Realty Transfer Tax Statement of Value lists a Fair Market Value for the building $820,480.00 despite the fact that of a PNC appraisal listing the amount of $195,000.00 and an previous auction that failed to get a bid above $100,000.00.

As part of the BDLP Agreement HCAID informed the Office of Community Development that they engaged a private developer, M.H.T. Holdings, Inc located at 37 Holloway Blvd. Buffalo, New York for the Northeastern Bank Building. 

For some reason, then Mayor John Quigley agreed to incumber the City of Hazleton to a IRREVOCABLE STANDBY LETTER OF CREDIT in the amount of $250,000.00 for the benefit of M.H.T. Holdings, Inc.  In his Opinion of Counsel, Attorney George Hluzdzik opined "It is my opinion that the CITY OF HAZLETON, upon execution of said Irrevocable Standby Letter of Credit, will be irrevocably committed, pursuant to the terms of said Letter of Credit, and that the said Letter of Credit, and all of the terms and conditions contained therein, are a binding, lawful, and legally enforceable contract under the laws of the Commonwealth of Pennsylvania," dated 12-27-1995.

The source of funds for this loan was contained in a "Contract For Enterprise Zone Program" between the Commonwealth of Pennsylvania through the Department of Community Affairs and the City of Hazleton.  The date of that agreement was 12-27-1995.  As collateral for this loan M.H.T. Holdings offered this property located in Buffalo, New York.

The blog "fix Buffalo" writes this piece about Mark H. Trammell of M.H.T. Holdings and the associated property.

In response to my previous post regarding the diocesen dis-investment plans, I received this comment from one of the most astute critics of Buffalo's mis-management and decline, Dick Kern.

"Thanks for taking up my longtime concern about Catholic abuse of power & use of govt funds to dispose of surplus property. . . now proposing to build more "new" while abandoning "old. Go look at the new Catholic church on the site of the old German Orphanage at Dodge & Northampton, surrounded by "Catholic" blight, which they sequentially dumped to corrupt Mark Trammell, son of corrupt City Court Judge Wilbur Trammell, who dumped to the city of Hazelton as bum security for a HUD loan, then to (Scott) Wizig of Houston, now to CAO. All while keeping the "shovel ready" center of the parcel for their own cheap use."
You can find pictures of the old German Orphanage by clicking here.  Dick Kern, mentioned in that blog post left this comment on another post.

That followed another scandal when disgraced Judge Wilbur Trammell's son bought the long-derelict parcel (564' X 355') from the Catholic Diocese for $25K - $30K. However, the Diocese cut a 'donut hole' for a new Catholic Church.

Trammell originally planned to develop HUD subsidized property on the site, calling it "Kimberly Park" (after his wife) as I recall. That plan encountered great community resistance in an area suffering massive vacancies.

Then Trammell went off to Hazelton PA & used the parcel as security on a $50,000 development loan to turn an abandoned building in downtown Hazelton into HUD-subsidized apartments. He alleged the parcel was worth several thousand dollars, its assessed value at the time.

He defaulted on the loan, so Hazelton took control of the property until it reverted to the City, eventually sold at tax auction to Wizig, along with his 300 to 400 other distressed tax-foreclosed parcels.

After causing mahem, Wizig was ultimately banned from Buffalo by Housing Court, so he "gifted" the parcel CAO since nobody else acceptable to the court wanted it.

Whether the Catholic Diocese should have managed their 'surplus' property in this manner is open to debate.

In a memo to City Council dated December 19,1995 , John H. Quigley, Mayor asks the Council to consider forgiving $150,000.00 of Community Block Grant money advanced to the HCAID for a parking feasibility study and a feasibility study of saving the Northeastern Building.  By resolution 95-140 and 95-141 the Council abided by the Mayor's request albeit the vote was 2-2.

The City of Hazleton entered into a Business Development Loan Program Agreement with M.H.T. Holdings Inc. on December 27, 1995.

In a letter to Ronald Slusser dated May 22, 1996 from the Hazleton City Authority Industrial Division, Mr. Charles F. Buckley, III, Executive Director informs the City of Hazleton that M.H.T. Holdings, Inc had relinquished their interest in the $250,000.00 BDLP loan.

Mark H. Trammell sent Charles Buckley, III a letter dated May 8, 1996 that stated "Due to recent project-related events, I, as president of MHT Holdings, Inc. relinquish our corporate interest in the loan referenced above [ Re: BDLP Agreement of 27 December 1995 ($250,000)].

Said loan is to be assigned back to the HCA-ID immediately without interruption."

Yet on October 21, 1996 Charles Buckley, III, Executive Director of the HCAID sent Ronald Slusser, City of Hazleton a letter that states in part  "The Northeastern Building is currently under an Agreement of Sale with MHT Holdings, Inc. of Buffalo, New York which has until November 30, 1996 to close on the Northeastern Building.  As per our agreement with M"HT Holdings, Inc. the HCAID has the right to pursue other potential developers for the Northeastern Building until they actually close on the property, and we are actively engaged in this process."  He goes on to explain that the Authority needs to advertise and award a construction bid so that the improvements mandated by the Pennsylvania Department of Labor and Industry must at a minimum be in progress by December 31, 1996. 

However there is no question that the contents of his letter were at the least misleading to the City since Trammell indicated that he was no longer involved as of May 8, 1996.

It is worth noting that from the beginning the original owner of the building was told he could never recoup his investment if he plunked down $1,400,000.00.  Yet, for some reason the Board of the Hazleton City Authority Industrial Division in 1995 though they knew better.

In the next of this series SOP will discuss how the Board of the HCA put its finances in peril by defaulting on that $500,000 loan from PNC.

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