At first glance, Collingswood Partners—the nonprofit agency responsible for promoting the borough’s business interests—appears to be operating under staggering debt.
At $333,344 in the red as of April 2011, Collingswood Partners is in the midst of paying off a $500,000, long-term loan from the state Department of Community Affairs (DCA), taken out in 2005 to assist with the LumberYard condominium project.
At the time, borough officials, including Mayor James Maley, touted the LumberYard project as one of the keys to revitalizing a dead zone on Haddon Avenue.
It turns out that while Collingswood Partners technically owns the debt, annual payments come from the borough government, adding to Collingswood’s overall debt responsibility for the struggling condominium complex. This means taxpayers are on the hook for the loan, even though they had little say in the decision to borrow the money.
Collingswood’s decision to involve borough government in a private real estate deal is an unusual one, according to one state official. And it hasn’t come without consequences.
The LumberYard debt contributed to Moody’s decision in 2011 to slash Collingswood’s credit rating, relegating it to junk status overnight. Moody’s cited Collingswood’s position as a “guarantor on $4.5 million of a redevelopment loan of $8.5 million” in the downgrade decision.
A loan to build the LumberYard
On Jan. 3, 2005, Collingswood adopted a resolution authorizing a loan agreement between Collingswood Partners and the borough, to assist in LumberYard redevelopment.
Collingswood made a deal to repay the $500,000, interest-free loan over 15 years. With yearly loan payments of $33,333—and a final payment of $33,338—the borough paid its fourth installment this past December.
Collingswood Partners Director Terry Seeley deferred comment to the borough’s former director of community development, John Kane, who still maintains an office in borough hall.
“The $500,000 was used to acquire the (former) Peter LumberYard site property,” Kane explained, adding that the type of loan wasn’t one available to a borough government, but rather to organizations like Collingswood Partners, responsible for business growth and promotion.
The LumberYard project, a mix of condominiums and retail space, qualified because the site sits in a Business Improvement Zone (BIZ). The LumberYard is the only BIZ in Collingswood.
“New Jersey Department of Community Affairs put together a six-million dollar program, and if you had a Business Improvement Zone inside a Business Improvement District (BID), you’d be eligible for the loan at zero percent interest,” Kane said.
Under state law, Downtown Business Improvement Zones are allowed to use public loans to help finance private development projects when they are considered "improvements" within the zone.
"Larger capital projects that leverage state funds along with other public and private sources are encouraged," Lisa Ryan, a DCA spokeswoman, wrote in an email.
LumberYard a bust?
Collingswood Partners, on its tax returns, defines its purpose as promoting “economic development within the borough” and to “improve the overall appearance and safety within the district and raise awareness of advantages of doing business within the borough.”
That mission, Kane said, prompted the LumberYard loan.
“The LumberYard makes the downtown larger. There is a block back there now that just wasn’t there before,” he said. “And what looks better? The way the LumberYard used to look, or now?”
Prior to redevelopment, a then-vacant Peter Lumber Yard site occupied the space, consisting of a large, empty lot—a site which Kane said the borough “had a lot of environmental difficulties” with.
Ten new businesses have opened in the LumberYard property since, Kane said, and the project has brought in new residents who reside in Collingswood’s main business district.
Among LumberYard businesses: Verde Salon, All Fired Up, The Kitchen Consigliere, and former occupant Lo Bianco—a restaurant borough officials say vacated the premises months after opening.
Still, it’s no secret that the LumberYard hasn’t been a runaway success. Stagnant condo sales drove Collingswood to purchase the units and rent them out. The borough appropriated nearly $6 million to finance the move.
While the LumberYard is a mix of residential and retail space, Collingswood Partners’ loan does not specifically deal with the retail portion, but rather the entire project.
And it's unusual for a publicly-funded downtown improvement organization to involve itself in a private real-estate venture, noted Jef Buehler, director of Main Street New Jersey, a downtown revitalization program that provides training and technical assistance to its members.
"The majority of them do not engage directly in real-estate development," he said. In a subsequent e-mail interview, Buehler added, "The risks are: if a project fails, it kills your broader effort and/or organization."
Kane said the loan doesn’t hurt Collingswood Partners’ operations. Partners collects a tax on business properties and also raises revenue through grants, investments and fundraisers. Partners reported $454,150 in revenue on its 2010 tax return.
None of these taxes—collected annually from borough businesses—go toward the loan payments. Kane said all payments are made by the borough.
“We expect that, when we complete the LumberYard project, we’ll be able to pay back this loan,” said Kane, adding that no LumberYard completion date has been scheduled, as negotiations for financing are still ongoing.
Construction to the LumberYard project’s final phase is not complete; economic factors caused borough officials to revisit original use plans at the site, believing office spaces—or a combination of office and residential space—might generate more success than a solely-residential use would.
Mayor James Maley also maintains Collingswood businesses have not suffered as a result of borough debt, adding that Cass Duffey, the borough’s director of community development and communications, has even begun retail recruitments in the last eight months.
Formerly, Duffey operated only as director of communications. In January of 2012, during a reorganization meeting, commissioners additionally named her community development director.
When measured in terms of time, Maley said the LumberYard project will be a benefit for Collingswood.
“(The LumberYard) is absolutely a success for the borough. It’s a very rough patch right now, yes, but are we about to come out of that? Yes,” he said. “There are two different levels to the project: a financial level, and a level (aimed at) improving the community with a focus on its business district. This project will be with us for the next 100 years. In terms of time, (LumberYard operations) will eventually prove profitable.”
(Patch Associate Regional Editor Lauren Burgoon and Regional Editor Tim Zatzariny Jr. contributed to this report.)
Tomorrow: Collingswood Patch talks to business owners about their opinions of Collingswood Partners’ work to promote economic development in the borough.