Businesses not repaying Houston development loans
It seems the city of Houston has loaned millions of dollars for private development projects that's not being repaid:
It starts with the Magnolia Hotel, downtown's self-proclaimed new standard for luxury complete with a lavish lobby, a beautiful billiards room, and rooms that can rent for $200 a night.
"Our mission is to revitalize downtown with beautiful new hotels," says the owner Steven Holtze.
He's a hotel tycoon.
"We have three: Denver, Dallas ...," he says.
But at the Houston location, it turns out he had some help -- a $9.5 million dollar loan backed by the city three years ago. The only problem? In all that time, the Magnolia hasn't paid a dime of it back, missing payment after payment even though Holtze says the hotel's making a profit.
"We actually had a pretty, real good year last year," says Holtze.
So, why not pay the loan?
"Well I don't want to get into all the details of exactly what the circumstances are," he says.
[snip]
Take the Crowne Plaza Hotel on Smith Street.
It received got a $5 million loan, but they haven't made a payment since the middle of 2003.
[snip]
The general manager of the Crowne Plaza Hotel told 11 News they're not having money problems either, but said for now their lawyers have advised they don't have to pay the loan.
But there is another problem tied in with the hotel loans:
It turns out Houston put up grant money it uses for its poorest neighborhoods as collateral on both loans putting more than $14 million dollars at risk.
"If this hotel doesn't pay its money, then that comes out of the future money the city of Houston has to provide playgrounds, daycare centers, homeless shelters," says the advocate [John Henneberger].
And how big a problem is loan repayment?
But the city's problems with bad loans don't end with luxury hotels. The Defenders discovered nearly $40 million dollars worth of loans, in default, that have to do with development. They were all issued by the Houston Department of Housing and Community Development. And some have been in default for longer than 10 years.
It would appear that Mayor White inherited this problem and, according to KHOU's story, he has appointed John Walsh to handle it. Unfortunately, the story doesn't explore in further detail what the city is doing to get the loans repaid, which would be nice to know as that's a huge amount of money the city could be putting to good use.
UPDATE: Banjo Jones has, uh, a rather succinct thought on the problem.
Posted by Anne Linehan @ 02/23/05 08:02 AM | Print |
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