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FALLS MAY HAVE TO PAY ON SPLASH PARK LOAN BILL COULD TAKE A THIRD OF $2.8 MILLION COMMUNITY DEVELOPMENT BUDGET

The city may have to spend nearly one-third of its $2.8 million Community Development budget to repay federal loans on the Niagara Splash water park if the owner doesn't do so, the City Council learned Monday.

Nearly $1 million in payments will be due in 1991 on a federal loan used to build the water park. If the park is sold, the loan would be paid in full.

No money has been budgeted in the 1991 spending plan for the loan repayments, according to William K. Clark, community development director.

"We left it open because we don't know how much (to set aside). We will definitely have to make some payment. We don't know how much. We'll come back to the Council when we know," Clark said.

He said $1 million is the maximum the city may have to put out to cover defaulted loans. About $900,000 would be the payment owed on the Niagara Splash water park. A number of other smaller loans make up about $100,000 of the total. Those include loans to the former Hysen's, Rainbow Security and Ontario Locomotive, Clark said.

The loans are Section 108 loans that the city must repay to the federal government even if the developers do not repay the city.

Clark said if the water park were sold, the city would be repaid in full.

The water park is one of several downtown developments by a group commonly known as the Niagara Venture, whose principals include Edward U. Bevilacqua of San Diego, Calif., and John P. Bartolomei of Niagara Falls. Their other holdings include the unfinished Falls Street Faire and Falls Street Station and the Inn at the Falls, which is also for sale.

A sale of the water park to the National Organization for Youth Recognition, an Initiate of the Chiefs of Police National Drug Task Force Inc., is under consideration by the Niagara County Industrial Development Agency. The organization has asked to finance $20 million in private bonds through the agency.

The agency was to consider the request at a special meeting today at its Park Avenue offices in Lockport.

Bartolomei has committed to use the proceeds from the sale, if it is finalized, to repay the city for about $10 million in federal loans, water and sewer bills and in lieu of tax payments and to use about $4 million to complete the Faire and Station.

"This will resolve all outstanding debt to the City of Niagara Falls," Bartolomei said last month.

"We're looking to the sale of the splash park," to wipe out the debt, Clark told the Council Tuesday.

He said the city should know where the Community Development budget stands by February. Section 108 payments on the park are due in February and July, with the July payment being the larger of the two. If the city did not make the payments to the federal government, the payments would be deducted from the city's community development allocation.

In another matter, the Council heard that work to reduce the flow of ground water through a drop shaft in the Falls Street Tunnel has been completed and the flow has been reduced from 4 million gallons a day to 2.1 million gallons a day, according to Nicholas E. Marchelos, grants and contracts administrator.

The city is under a court order to reduce the flow in the tunnel. At one time, 11.5 to 15.5 million gallons of ground water a day were flowing through the tunnel into the Niagara River. A U.S. District Court judge ordered the city to treat 6 million gallons of the flow at the sewage treatment plant.

Marchelos said the city has complied with the court order and gone beyond it to do all it could to reduce the flow cost effectively.

"That doesn't mean any regulatory agency couldn't come back at any time and say it's not enough," he said. The Council also set a special meeting for 4:30 p.m. Thursday to consider the mayor's budget vetoes.

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