City's Bluffwalk tab nears $1 million mark

Lynchburg is on the verge of spending its one-millionth dollar paying on a loan for Bluffwalk Center, a downtown hotel and restaurant complex.

City Manager Kimball Payne said that the city plans to wire the payment of about $247,198 on the federal loan on July 23. This would be the fourth straight year that the city, which backed the loan, has made the payment without help from Bluffwalk.

To date, the city has paid about $763,716 toward the loan.

“At this point I don’t anticipate that we’re going to receive the payment from Bluffwalk,” Payne said Wednesday. “They’re not making the money they need to make to satisfy their other obligations as well as make this payment.”

Hal Craddock, managing partner of the Bluffwalk developers, said the project’s revenue has increased, but not enough to make all of its loan payments. He is working to access tax credit funds that belong to the project so he can repay part of Bluffwalk’s debt to the city.

Bluffwalk’s developers got the $3.2 million loan from the U.S. Department of Housing and Urban Development in 2002 to help renovate two aged downtown buildings. HUD required City Council to agree to pay back the loan if the developers could not.

The developers made all payments on the loan until 2007, when the city made its first payment of $257,944 from its budget.

Since then, the city has made the payment with Community Development Block Grant money, which the city receives from HUD and uses for neighborhood revitalization, job development and other goals.

Bluffwalk has made smaller, interest-only payments each February without city help.

Bluffwalk is obligated to repay the city, but there is no timeline for that repayment.

Craddock said that the project’s financial picture is starting to look better. The hotel had 82 percent occupancy in June, its best month so far. “We need to have that be the norm, rather than the exception,” Craddock said.

Last fall Bluffwalk gave the city $10,000 to start repaying its debt, and it was setting money aside each month for future payments. That stopped this spring, when Bluffwalk started paying $2,000 per month to settle a lawsuit with an interior designer that Bluffwalk owed money to, Craddock said.

Craddock said the developers are trying to access $454,000 in tax credit money to make another payment to the city. Wells Fargo, which inherited Bluffwalk’s tax credit accounts from Wachovia as the two banks merged, is holding those funds.

The money belongs to Bluffwalk, but the bank can hold it until February 2011, Craddock said.

Wells Fargo wants financial audits of Bluffwalk before releasing the money, Craddock said. However, the audits for 2008 and 2009 have not been completed because of missing records on one of Bluffwalk’s Wachovia accounts.

Craddock said Wachovia inexplicably stopped sending those statements after 2007.

The transition from Wachovia to Wells Fargo has made it difficult to get in touch with the right people to handle the issues, Craddock said. “If I can get one of these people on the phone and explain the situation to them … maybe a deal can be made.”

A Wachovia spokesperson could not comment on the Bluffwalk situation Wednesday.

City Council members also have asked in the past to receive audits and other financial data from Bluffwalk. Payne said he has received some reports from Bluffwalk, but he wants more.

“The audits are not being produced in a timely manner due to some other issues that I don’t completely understand,” Payne said. “I’ve also asked for their regular routine financial data, and I’ve been told that will be provided to me as well.”