We must ask "WHY?"

We must ask "WHY?"



Friday, October 1, 2010

I had this blog post referred to me. It is a MUST read about Wilkes-Barre corruption.

"February 15, 2007
The Hotel Sterling Scandal Part 1 by John Morgan
Talk with anyone in northeastern Pennsylvania and mention corruption in Wilkes-Barre and Luzerne County and you'll hear a groan. It seems like public officials there have been corrupt for generations. I recall going to Plymouth as a kid for family wakes and hearing such tales. I haven't been back to that area for decades until recently. Driving around for old times sake I was shocked at how the City has deteriorated.

Wilkes-Barre is one of those mid-sized Pennsylvania cities that is down on its luck. The loss of middle class jobs has left a depressed economy. When Tropical Storm Agnes rolled through in 1972 and flooded the area it just never recovered. That isn't an excuse for the misuse of public funds however, just a catalyst.

The Hotel Sterling once a jewel of the City. Now vacant and abandoned it's become the center of a controversy. This story is culled from local documents on file at the Luzerne County Prothonotary's office, news accounts, and personal information from local bloggers who wish to remain anonymous. I have been asked to write the story so it gets coverage outside Luzerne County.

It revolves around the $20 million renovation of the old riverfront hotel. A non profit organization formed by Congressman Paul Kanjorski called CityVest, controlled by powerful and politically connected locals and funded by your tax dollars, is up to its ears in questionable dealings. These involve neighboring properties.

Mayor Tom Leighton, with his background in real estate, and City Council have either been grossly negligent with taxpayer funds or outrageously incompetent. The story begins with properties owned by something called the Perry-Block Partnership. This group out of Portland, Maine owned real estate in a Keystone Opportunity Zone which CityVest wanted for the Sterling project. They owed over $17,000 in back property taxes however and the structure on the land wasn't desirable to CityVest. In order to be designated as a Keystone Opportunity Zone the structure had to be acceptable. Suddenly it was mysteriously condemned and demolished by the City after Council forgave the back taxes.

Financially strapped Wilkes-Barre spent $303,000 demolishing the building at 37-45 West Market Street. This in spite of the fact they couldn't afford to repair fire stations in dire need of attention (Complaint # 11463-2006). To protect their financial interest and perform their fiduciary duties to taxpayers they filed a lien against the real estate. What they failed to do was also file an open end mortgage which would have guaranteed payment of the demolition costs if/when the property was sold.

Lo and behold it was sold. Sold to CityVest for $325,000. The lien was transferred to the non profit instead of being honored and the $303,000 returned to the residents of Wilkes-Barre. This was a sweet deal for both Perry-Block, which got the full amount at settlement and for CityVest which got to keep the additional $303,000 it otherwise might have paid for the land.

CityVest also got another sweet deal through the City on a parking lot. Eyeing a convenient parking lot adjacent to their project they offered to buy the land from the owners. They refused to sell and, next thing they knew the City condemend it and took it by eminent domain. Guess who wound up with a new parking lot? CityVest for its Hotel Sterling project.

How, you guess, does a non profit which had only prior to this rehabbed two homes in the City get so much clout? How does a group go from fixing up a couple houses to getting a $20 million renovation project? Enter Congressman Paul Kanjorski. Eight million in public funds was collected, $4M from Luzerne County, $3M from the Governor and $1M from a HUD grant secured by the Congressman.

How else do you make a project developing $300,000 condos work in a depressed market like Wilkes-Barre? Private money can't make numbers like $20 million add up to a profitable enterprise. The developers needed public tax money to make this work. CityVest is a who's who of local figures, from Alex Rogers, head of a printing company with many city contracts, to Dr. Brian O'Donnell of the local school board (essential for those tax forgiveness and TIF votes), the President of Kings College, Richard Goldberg a local lawyer, and Thomas Williams of the Congressman's office. (note: I'm intricately related to the Williams' family though I don't know if he and I are related). Their Board also includes Maureen Bufalino of Omega Financial Group. Mark Bufalino is the Chair of the Luzerne Democratic Committee.

Let's look at the properties involved. The old Hotel had been abandoned and sat vacant for four years. CityVest spent $250,000 just to make it secure and put a roof on it so it was weather proof. It sounds to me like this was definitely a blighted property. An eyesore is probably more like it. CityVest decided to renovate it into offices, condos, and stores but the cost was prohibitive. They also would need surrounding properties to make it viable.

The parking lot was essential. The Mayor conveniently knew an assessor from his days in that business who, according to the lawsuit filed against the City by the previous owners, ripped them off. When they refused to sell their land the City moved in and seized it. Since its new use is going to be the same as its old use this is outrageous and an abuse of eminent domain. Gee, it helps to have powerful friends.

The properties from 37 to 45 West market are a very interesting sotry and the center of another lawsuit for malfeasance. A citizen activist has sued City officials for their negligence in these deals. Originally fit enough to qualify as a KOZ the Maine ownership was behind in their taxes. City Council forgives the taxes then removes the KOZ designation. The structure is suddenly declared an urgent hazard and an emergency demolition is done by the City.

The real estate is then sold to CityVest without reimbursing the City for the $303,000 cost of the demolition. This is a sweet way to finance a questionable real estate development folks. Remember that $8 million of your tax dollars are in this project. If you live in Luzerne County you've kicked in for all of it. Pennsylvanians donated $3 million and federal taxpayers $1 million. So far.

There are a lot of questions involved with this deal and few answers so far. Why was the Keystone Opportunity Zone designation removed and the structure suddenly deemed unsafe? Why was scarce money used for its demolition instead of put to use repairing fire stations? Why did City Council forgive the back taxes? Why didn't the Mayor and Council get an open end mortgage to protect the taxpayers' interests? Why was the property allowed to be sold without the lien being repaid?

A lot of the answers seem to involve the inclusion in the deal of their long time Congressman. How else does a minor player like CityVest suddenly get a $20 million project and $8 million in public grants to finance it? That $8 million is our money and we deserve to know several things. First of all, is this project economically viable? Is there a viable market in Wilkes-Barre for $300,000 condos? Why were all these questionable deals done and why were so many people screwed? Most importantly, why didn't CityVest repay the lien to the City?

Why haven't the Mayor and City Council insisted on repayment? W-B doesn't have $303,000 to throw away. A short drive through the City reveals that to anyone. What other projects are being developed in tandem with the Sterling to attract the types of buyers needed? Why aren't officials investigating this potential malfeasance of public funds?

These deals reek of corruption. They reek of insider connections and the abuse of influence. The owners of Perry-Block already made off with their $303,000 from the taxpayers. CityVest has eight mill of our money and the way they're wheeling and dealing and ripping people off heaven knows what's really going on.

I just keep going back to those old days, sitting in small living rooms in Plymouth listening to the men, most of them coal miners, talking about how corrupt the place was. Reading all this leads me to believe not much has changed in Luzerne County. These people deserve better."

More later

The Hotel Sterling Part One


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