After missed payments, city sends Mahogany’s loan to collections

After missed payments, city sends Mahogany’s loan to collections
This is the photo of the check Liz Rogers claimed to have sent the city, in an attempt to contradict the city's claims the March and April payments weren't made. (PHOTO: FOX19 NOW)
This is the photo of the check Liz Rogers claimed to have sent the city, in an attempt to contradict the city's claims the March and April payments weren't made. (PHOTO: FOX19 NOW)

CINCINNATI, OH (FOX19) - It took four months into a renegotiated taxpayer-backed loan deal for Liz and Trent Rogers to miss the first payment on a $100,000 loan, city loan records show. The missed payments come exactly one year after the city of Cincinnati forgave $874,000 in tax dollars the Rogers owed the city after the Mahogany's restaurant at The Banks closed for good in 2015.

In March 2015, the city manager's office approved a new loan agreement that forced taxpayers to pay off $874,000 of a $974,000 grant/loan deal given to the Rogers to open a soul food restaurant inside The Banks project.

The original deal, signed in 2012, handed the Rogers $674,000 in a grant to design and build Mahogany's. The city lent another $300,000 to the Rogers to purchase furniture, fixtures and equipment. The 2012 agreement allowed the city to foreclose on the Rogers if they defaulted on the loan, but the city admitted to FOX19 NOW it never took action to collect those tax dollars after the loan fell several months behind in payments.

The original agreement also required the Rogers to repay the $674,000 grant for the project, added to the $300,000 secured loan, the agreement states.

City loan payment records show the first payment under the new deal was due on Nov. 1, 2015, which the Rogers made on time. The December 2015 and January 2016 payments were also paid on time, city records show.

The February 2016 payment was due Feb. 1, 2016, but the city's accounting shows that payment wasn't made until Feb. 16—15 days late. The city received no payment for March or April, records provided to FOX19 NOW show.

The city sent the Rogers two separate "demand letters" on the 10th of February and 10th of March, asking for the past due balance to be paid, plus a late fee. As of this report, the March and April 2016 payments have not been made. Those letters made no mention of default, which is a legal course of action the city could take to take collateral the Rogers put up in case they did not uphold their terms of the agreement.

The problem with the city suing the Rogers for the collateral used to secure the loan is, the city gave up all rights to the Rogers collateral in the March 2015 deal.

On March 17, 2015, the Rogers, City Manager Harry Black, Director of Trade and Development's Oscar L. Bedolla and two other city officials signed an amended loan agreement that forgave $874,000 in tax dollars lent to the Rogers. In return, the Rogers agreed to repay a $100,000 loan and the city and the Rogers called it even.

In that deal, the city also agreed to reduce the monthly payment from $3,073.13 to $800 a month. The Rogers' interest rate was also lowered from 4.25 percent to a zero percent interest loan.

The city manager also agreed to give up any claim to the Rogers' collateral used to secure the original loan. That collateral included:

-the Mahogany's Leasehold Mortgage and Security Agreement on The Banks location, which expired after the Rogers landlord terminated the Mahogany's lease in 2015. Because of the lease termination, the city no longer had a claim to stake. 
-A Security Interest on The Banks Mahogany's property
-the city gave back its mortgage hold on Liz Rogers' former Mahogany's property in Hamilton, OH. 
-the city was named life insurance beneficiaries on policies held by the Rogers, but the city no longer had a right to those payouts since the Rogers let the policies expire because of their "non-payment of the premiums," the March 2015 amended loan agreement states.

"This represents the most realistic means for the city to recoup monies owed," City Manager Harry Black said in March 2015, days after signing the deal with the Rogers.

Despite being 10 months past due on the original loan when we investigated the Mahogany's deal in the summer of 2014, the city never formally notified Rogers of the default, which technically means she was never in default on the loan. By not holding Rogers in default, the city can get away from going after the grant, which went to pay for design and construction of Mahogany's.

"Why has the city not enforced the terms of the agreement," FOX19 reporter Jody Barr asked Trade and Development's McElravy in a July 2014 interview. "Our goal is to have a thriving collection of restaurants down at the Banks. And, that's part of why we did the loan in the first place and if it were to work out that there isn't a viable path forward, then we'd have to reevaluate where we are," McElravy said then.

McElravy said the city's position was to allow Rogers to catch the loan up instead of enforcing the terms of the loan agreement, which would have essentially shut Mahogany's doors.

"At what point does the city go, enough is enough," Barr asked, "That's going to be a judgment call," McElravy said. "That is going to depend on the current situation and I think it's premature to speculate as to when that point may come," McElravy told FOX19.

This isn't the first time the city of Cincinnati's failed in the loan business. A FOX19 investigation in July 2014 found of the 59 active city business loans at that time, 27 were past due. That past due amounted to just under $1 million then. Our analysis of city loan records also found since 2005, the city forgave 38 business loans totaling $13.5 million tax payer dollars.

"Is it fair to tax payers to use their money this way," Barr asked McElravy in the July 2014 interview. "I think it's fair to tax payers to try to do the best we can to ensure that The Banks and the tenants at The Banks are operating viable, successful businesses," McElravy explained.

In July 2014, Rogers told FOX19 she'd accept a loan forgiveness deal if the city would agree to one. It's an option Rogers told us she planned to present to the city in the summer of 2014.

The city forgave nearly 90 percent of what Rogers owed when it renegotiated the deal in March 2015.

"Have there been any discussions about extinguishing this loan," Barr asked McElravy. "No," the interim director of Trade and Development answered. "Is that an option," Barr asked, "In a wide range of possibilities—theoretically—yes," McElravy said during that July 2014 interview.

"Is anything short of full payment going to be accepted," Barr asked in 2014, "Our goal is to be fully repaid," McElravy said, "And we're going to continue to work toward that goal."

"I have no idea what you guys are talking about," Liz Rogers told FOX19 NOW Investigative Reporter Jody Barr by phone Thursday. We called Rogers, seeking comment on this report.

Rogers claimed she made the payments on the March and April past due balances on April 6, the day before we called Rogers for this report. When asked for receipts, Rogers initially declined to provide those to FOX19 NOW.

Rogers later emailed a picture of a check, made out to the "City of Cincinnati" for the amount of $1,600. Rogers claimed she'd mailed the check and the city received it April 6. The check was dated March 31, 2016.

"This doesn't make any sense at all," Rogers said by phone when we explained what was showing on the payment records the city provided to FOX19 NOW through an open records act.

We contacted City of Cincinnati Communications Director Rocky Merz to ask him to double check the city's files to be sure the Rogers. After checks with the city's loan department and the treasurer's office, Merz confirmed the city had not received any payments from the Rogers since the Feb. 16 payment.

"I'm wondering if somebody's holding my stuff," Rogers told Barr by phone after informing her the city could find no record of her payment.

"We're going to continue to work through the process and do everything within our power to help her stay current and bring this loan current and get as much money back for the taxpayers as we can," Merz told FOX19 NOW in an interview Thursday morning.

The city's already started the collection process against the Rogers, Merz confirmed. If the past due balance is not paid "soon," Merz said, the city will move forward and enforce the terms of the March 2015 agreement.

Those terms allow the city the right to seek legal action against the Rogers for any default of the agreement.

"We're not there yet," Merz said.

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