The Center Bar & Grill on Green Street is owned by Angel Rodriguez, a Worcester police officer. (T&G Staff/JIM COLLINS)
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The Crescent Café, at 69 Canterbury St., is owned by Charles Luster and Stacey DeBoise Luster. (T&G Staff/JIM COLLINS)
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The whole intent is to get a business started, not to make it so prohibitive so they go out of business.
-- JULIE A. JACOBSON, ASSISTANT CITY MANAGER
WORCESTER — Several city businesses that got loans using public dollars have been lax in making payments, and in the case of one popular restaurant, those payments are years overdue. As a result, city officials are being criticized for a lack of muscle in making collections.
The city has funneled nearly $600,000 of small low-interest and interest-free “micro-loans” to 28 businesses since the federally funded program started in 1993.
While about half of the loans have been repaid and the businesses are still in operation, some of the micro-loan recipients have gone bankrupt, or out of business, and never paid the money they owed.
Others have had their repayments indefinitely deferred.
Some, such as Kenmore Diner, have had spotty repayment histories, and city officials say they have been unable, or reluctant, to crack down on the businesses because of restrictive contract terms and a desire not to be too heavy-handed in the administration of a program designed to fund sometimes risky community ventures.
And there are businesses that are often late on their bills, such as Crescent Café, a Canterbury Street restaurant and nightclub co-owned by Worcester Public Schools Human Resources Manager Stacey DeBoise Luster and her husband, Charles Luster; and Center Bar & Grill on Green Street, owned by Angel Rodriguez, a Worcester police officer.
Finally there are loans that have been “deferred” for many years. These include $50,000 loaned to the Martin Luther King Jr. Business Empowerment Center on Chandler Street in 1998, and $5,000 loaned to the Main South Community Development Corp. in 1994.
Assistant City Manager Julie A. Jacobson, asked last week to explain the deferrals, said she could not immediately provide information about them without extensive research in city archives.
“Those loans are 17 and 13 years old, respectively,” Ms. Jacobson said.
As for the late payments, the Lusters paid four months of late bills and Mr. Rodriguez paid five months of back bills this week after the Telegram & Gazette inquired about the status of their loans, city officials said.
Kenmore Diner, a breakfast and late-night eatery on Franklin Street that was rebuilt after being destroyed in the demolition after the 1999 Worcester Cold Storage and Warehouse building fire, got a $26,000 no-interest loan from the city in 2000 that helped restart the business along with $148,000 in private mortgages.
However, after making three years of payments from 2002 to 2005 following a two-year deferral period, the Kenmore's owner, James Yantsides, didn't make another payment, according to the city's records. Mr. Yantsides owes a balance of about $18,000, which includes accumulated late fees.
City officials say they send monthly bills to recoup the micro-loans and that they also have relied on negotiation and persuasion to attempt to get recipients to make payments.
Ms. Jacobson said the micro-loans, which legally are required to be repaid, make up only a small portion of the $4 million to $5 million in federal housing and community development grants and loans the city distributes each year.
“The majority of these funds are not intended to come back to the city,” Ms. Jacobson said.
In an interview, Ms. Jacobson and Paul Morano, the city's director of business assistance, said that while the city puts liens on all loan recipients' properties, the liens are subordinate to the principal mortgages and so the city has little recourse other than persuasion if loan repayments are not forthcoming.
“In order for us to get our dollars back, we'd have to buy out everyone in front of us,” Mr. Morano said.
“That wouldn't make any sense,” Ms. Jacobson said. “We would like to get the money back but the reality is these are risky loans. And we don't want to shut down a business and have these people lose their jobs.
“The whole intent is to get a business started, not to make it so prohibitive so they go out of business,” said Ms. Jacobson, noting that the Kenmore employs seven workers.
In an interview, Mr. Yantsides, the Kenmore's owner, said he intends to satisfy his obligation to the city, but that his first priority has been to pay off his mortgages. He said he has been paying about $6,000 a month on the mortgages and that he plans to have them paid off in about nine months.
Mr. Yantsides offered a variety of explanations, including that business has been slow for a few years and that his wife takes care of the bills.
“I will take care of it,” he said.
Critics of the way the city manages the loan program say, however, that the apparently lax approach to collecting taxpayer money is not acceptable and is in marked contrast with how ordinary residential taxpayers and ratepayers are treated when it comes to nonpayment and late payment of their financial obligations to the city.
Michael N. Abodeely is a Worcester lawyer who 10 years ago represented a former diner operator who challenged a request by the Kenmore for zoning variances and special permits to build the new diner.
Mr. Abodeely said he thinks the Kenmore might have benefited from sympathy because of what happened to the business after the 1999 fire, in which six city firefighters were killed.
“But if they owe money, then they have to pay it,” he said. “If you owed money, the city would go after you.”
Meanwhile, of the five micro-loans that have been given out since 2004, one, the Hooka Hot Spot, a smoking lounge on a prime downtown corner, went out of business in 2009 after less than a year and has filed for bankruptcy. City officials say they are unlikely to recoup the $27,000 still outstanding on the $30,000 they loaned the business.
The others — the Kenmore, Crescent Café, Center Bar & Grill, and Simply Bella Weddings dress shop on Portland Street — are still going concerns.
The Lusters borrowed $20,000 under the micro-loan program, at 4 percent interest, when they started Crescent Café in 2008. They also got a $10,000 no-interest loan at the same time through a separate façade improvement program; that loan's payments are deferred and the money will be converted to a grant if the business is still open in five years.
The couple owed $1,553 when they were billed at the start of this month, according to an invoice provided by the city budget office. The total includes the four months in arrears on the micro-loan's $368 monthly payments going back to September as well as $10 a month in late fees.
Asked why he had fallen behind on his payments, Crescent Cafe's co-owner and manager, Charles Luster, said: “The economy.”
Mr. Luster said he hopes business will improve when the restaurant-nightclub — which has only been open Fridays and Saturdays — begins full-time operations later this month and in the long term if neighborhood revitalization efforts succeed.
“It's a good program,” he said of the micro-loans.
As for Mr. Rodriguez, he paid $2,332, which included five monthly installments of $456.46 dating to August, plus $10 a month in late fees. The terms of his $30,000 loan, which he took out in 2007, include 7.25 percent interest.
One longtime skeptic of the city's role in supporting private businesses, City Councilor Konstantina B. Lukes, said the micro-loan program, along with other city grants, loans and tax breaks, ought to be reviewed more thoroughly to see if they are really producing benefits, such as job creation touted by city officials and other supporters.
“We are constantly trying to create new ideas about how to expand the tax base and retain jobs, but if they are not working then we have to go back to the drawing board,” Mrs. Lukes said.
Contact Shaun Sutner by e-mail at ssutner@telegram.com.
The city has funneled nearly $600,000 of small low-interest and interest-free “micro-loans” to 28 businesses since the federally funded program started in 1993.
While about half of the loans have been repaid and the businesses are still in operation, some of the micro-loan recipients have gone bankrupt, or out of business, and never paid the money they owed.
Others have had their repayments indefinitely deferred.
Some, such as Kenmore Diner, have had spotty repayment histories, and city officials say they have been unable, or reluctant, to crack down on the businesses because of restrictive contract terms and a desire not to be too heavy-handed in the administration of a program designed to fund sometimes risky community ventures.
And there are businesses that are often late on their bills, such as Crescent Café, a Canterbury Street restaurant and nightclub co-owned by Worcester Public Schools Human Resources Manager Stacey DeBoise Luster and her husband, Charles Luster; and Center Bar & Grill on Green Street, owned by Angel Rodriguez, a Worcester police officer.
Finally there are loans that have been “deferred” for many years. These include $50,000 loaned to the Martin Luther King Jr. Business Empowerment Center on Chandler Street in 1998, and $5,000 loaned to the Main South Community Development Corp. in 1994.
Assistant City Manager Julie A. Jacobson, asked last week to explain the deferrals, said she could not immediately provide information about them without extensive research in city archives.
“Those loans are 17 and 13 years old, respectively,” Ms. Jacobson said.
As for the late payments, the Lusters paid four months of late bills and Mr. Rodriguez paid five months of back bills this week after the Telegram & Gazette inquired about the status of their loans, city officials said.
Kenmore Diner, a breakfast and late-night eatery on Franklin Street that was rebuilt after being destroyed in the demolition after the 1999 Worcester Cold Storage and Warehouse building fire, got a $26,000 no-interest loan from the city in 2000 that helped restart the business along with $148,000 in private mortgages.
However, after making three years of payments from 2002 to 2005 following a two-year deferral period, the Kenmore's owner, James Yantsides, didn't make another payment, according to the city's records. Mr. Yantsides owes a balance of about $18,000, which includes accumulated late fees.
City officials say they send monthly bills to recoup the micro-loans and that they also have relied on negotiation and persuasion to attempt to get recipients to make payments.
Ms. Jacobson said the micro-loans, which legally are required to be repaid, make up only a small portion of the $4 million to $5 million in federal housing and community development grants and loans the city distributes each year.
“The majority of these funds are not intended to come back to the city,” Ms. Jacobson said.
In an interview, Ms. Jacobson and Paul Morano, the city's director of business assistance, said that while the city puts liens on all loan recipients' properties, the liens are subordinate to the principal mortgages and so the city has little recourse other than persuasion if loan repayments are not forthcoming.
“In order for us to get our dollars back, we'd have to buy out everyone in front of us,” Mr. Morano said.
“That wouldn't make any sense,” Ms. Jacobson said. “We would like to get the money back but the reality is these are risky loans. And we don't want to shut down a business and have these people lose their jobs.
“The whole intent is to get a business started, not to make it so prohibitive so they go out of business,” said Ms. Jacobson, noting that the Kenmore employs seven workers.
In an interview, Mr. Yantsides, the Kenmore's owner, said he intends to satisfy his obligation to the city, but that his first priority has been to pay off his mortgages. He said he has been paying about $6,000 a month on the mortgages and that he plans to have them paid off in about nine months.
Mr. Yantsides offered a variety of explanations, including that business has been slow for a few years and that his wife takes care of the bills.
“I will take care of it,” he said.
Critics of the way the city manages the loan program say, however, that the apparently lax approach to collecting taxpayer money is not acceptable and is in marked contrast with how ordinary residential taxpayers and ratepayers are treated when it comes to nonpayment and late payment of their financial obligations to the city.
Michael N. Abodeely is a Worcester lawyer who 10 years ago represented a former diner operator who challenged a request by the Kenmore for zoning variances and special permits to build the new diner.
Mr. Abodeely said he thinks the Kenmore might have benefited from sympathy because of what happened to the business after the 1999 fire, in which six city firefighters were killed.
“But if they owe money, then they have to pay it,” he said. “If you owed money, the city would go after you.”
Meanwhile, of the five micro-loans that have been given out since 2004, one, the Hooka Hot Spot, a smoking lounge on a prime downtown corner, went out of business in 2009 after less than a year and has filed for bankruptcy. City officials say they are unlikely to recoup the $27,000 still outstanding on the $30,000 they loaned the business.
The others — the Kenmore, Crescent Café, Center Bar & Grill, and Simply Bella Weddings dress shop on Portland Street — are still going concerns.
The Lusters borrowed $20,000 under the micro-loan program, at 4 percent interest, when they started Crescent Café in 2008. They also got a $10,000 no-interest loan at the same time through a separate façade improvement program; that loan's payments are deferred and the money will be converted to a grant if the business is still open in five years.
The couple owed $1,553 when they were billed at the start of this month, according to an invoice provided by the city budget office. The total includes the four months in arrears on the micro-loan's $368 monthly payments going back to September as well as $10 a month in late fees.
Asked why he had fallen behind on his payments, Crescent Cafe's co-owner and manager, Charles Luster, said: “The economy.”
Mr. Luster said he hopes business will improve when the restaurant-nightclub — which has only been open Fridays and Saturdays — begins full-time operations later this month and in the long term if neighborhood revitalization efforts succeed.
“It's a good program,” he said of the micro-loans.
As for Mr. Rodriguez, he paid $2,332, which included five monthly installments of $456.46 dating to August, plus $10 a month in late fees. The terms of his $30,000 loan, which he took out in 2007, include 7.25 percent interest.
One longtime skeptic of the city's role in supporting private businesses, City Councilor Konstantina B. Lukes, said the micro-loan program, along with other city grants, loans and tax breaks, ought to be reviewed more thoroughly to see if they are really producing benefits, such as job creation touted by city officials and other supporters.
“We are constantly trying to create new ideas about how to expand the tax base and retain jobs, but if they are not working then we have to go back to the drawing board,” Mrs. Lukes said.
Contact Shaun Sutner by e-mail at ssutner@telegram.com.