YOUNGSTOWN Rules for loans aren't always in black and white

The minority loan program needs to be overhauled so it isn't open to interpretation, says one official.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- Four months ago the city control board removed from its agenda a proposed $40,000 loan for a minority-owned company.
Questions about back taxes owed, how workers are paid and where the company is located clouded the loan application.
The issue has grown more controversial by the week, leading to calls for reform.
The request will remain in limbo until Youngstown's loan underwriter, the Mahoning Valley Economic Development Corp., finishes processing the application and returns it with the questions answered, say control board members.
"That's where I'm at. I'm awaiting the [underwriter] recommendation," said Mayor George M. McKelvey, who heads the board. "That guides our actions."
JNH Trucking, the company seeking the loan, wants the money to buy two dump trailers so it can expand the business. JNH and its backers argue that the questions were answered months ago and the company qualifies for the help.
The city's delay constitutes biased and unfair treatment, they say.
"I can't find ... a scintilla of evidence why my client's loan is being denied," said E. Winther Mc-Croom, JNH's lawyer. "It's a smokescreen ... to carry out an ultimate purpose of denial."
McCroom has leveled charges of racism, which were followed by strong city denials. Late last month city council questioned a U.S. Department of Housing and Urban Development representative about the issue.
Who is right about whether the company yet qualifies for the loan is unclear -- and that's precisely the problem.
Gray areas: The city's minority loan program needs a complete review to remove the considerable gray areas, said Jay Williams, director of the city Community Development Agency. CDA administers the city's federal money and minority loan programs.
Any loan program -- private or public, for minority-owned companies or not -- needs well-defined standards, Williams said. As little should be left to interpretation as possible so there is no room for misunderstanding, he said.
That isn't the case now in the city's two minority loan programs, said Williams, who is black. It's unclear to him which agency has what responsibilities.
The program is needed and its intentions are good, he said. Williams added, however, that the program's rules aren't clear enough when compared to his experience in lending. He was a bank vice president before taking the CDA job in late October 2000, after the JNH loan first went to the control board.
Williams wants the city to thoroughly review the program.
Control board members agree.
JNH supporters don't disagree but caution that any review must keep in mind the goals of helping minority companies.
Racism charge: After the control board removed the loan from its agenda, a frustrated McCroom made his case before city council in December. He argued the control board -- McKelvey, Finance Director Barbara Burtner and Law Director Robert Bush Jr. -- was blocking the loan without a good reason.
McCroom is convinced that there is a pattern of the city's shutting out minority businesses and called for a HUD investigation.
To support his racism charge, McCroom points to a recent $1 million city loan to Metropolitan Bank and past failed loans to the defunct Wick-Pollock Inn and B & amp;O Station restaurant. None got the scrutiny of his client because none was black-owned, McCroom said.
"How do you do that? How is that fair?" he asked. "How can you, in that environment, turn these people down? It's politics as usual."
Response: Burtner asked several questions in the months after the loan application went to the control board. Those included how many employees JNH has and its payment toward almost $60,000 in federal back taxes. She was not satisfied with the answers.
Asking questions has nothing to do with race, Burtner said. A flag goes up when any company that owes federal taxes seeks a federal loan, she said.
"I did not single out this company," Burtner said. "I feel very comfortable in my position."
MVEDC made its loan recommendation based on three conditions. The agency wanted JNH's proof of workers' compensation insurance, updated payments toward back taxes and collateral.
In January, MVEDC also said it needed more information about whether JNH workers were independent contractors or on the company payroll.
McCroom questions why the agency first sent the loan application to the city for approval if it still had questions. He suspects the agency later asked for more information in deference to city leaders.
MVEDC did not respond to calls seeking comment.
Current status: On Jan. 16 the control board sent the application back to MVEDC for more processing, where it remains.
The control board is set up to approve or turn down items, not to be an administrative board that does the work, Bush said.
McKelvey said that the control board will review MVEDC's recommendation once the processing is done. McCroom has been told repeatedly that he should work with MVEDC to complete the loan processing, the mayor said.
McCroom said he wasn't aware of that and hasn't met with MVEDC. The loan application already is complete and there's no need for more processing anyway, the lawyer counters.
"It's in full and complete compliance with the law and the criteria put before them," McCroom said. "It's ridiculous."
Instead of cooperating, McCroom is taking the offensive. He is arguing the control board doesn't have the authority under the city charter to block items under its review. The power to carry out spending lies with city departments, such as CDA in this case, McCroom said.
That viewpoint has no legal basis, Bush said. The city has a strong mayor form of government under the charter, he said. One way to exercise those powers is via the control board, Bush said.
Councilman enters fray: In February, James E. Fortune Sr., D-6th, council's finance chairman, challenged MVEDC's need for more information on JNH workers.
Fortune then arranged a meeting about the city's minority loan program later in the month. Invited were other council members, JNH representatives Leggett and Mc-Croom, and Phil Braman, the HUD representative assigned to the Youngstown area.
Fortune said he wanted assurances that the federal government still values the minority program, not necessarily the specifics of the JNH loan.
Fortune said he got the answer he was looking for and has no problem with a complete review of the city's loan program.
The session took Braman by surprise. He is new to the position and thought the meeting was to get to know city officials. Instead, the JNH loan was brought up.
Loan underwriting is a local process that HUD doesn't handle, Braman said.
"It's not really our role to get involved in single loan qualifications and disqualification," he said.
Braman is willing to look at the city's process. There's little HUD would do beyond that, he said.
Checking on whether the loan correctly flowed through the bureaucracy might be hard, said Williams, the city CDA director.
The city's process is ambiguous at best.
One thing is clear, Williams said: The control board's questions were appropriate. He points to the loan program guidelines.
"Please note that the board of control may place additional conditions on the assistance," the rules say.
Williams finds the racial bias accusations curious.
First, the program is specifically for minorities and has lent plenty of money over the years. Second, the control board is as diverse as JNH's owners. The control board is made up of a white man, a black man and a white woman.
Race most likely has become an issue because of the program's ambiguities, he said.