City officials say Gagster's -- the City Market restaurant Councilman Lewis Rotella wants to help out by waiving city back tax penalties -- owes more than $38,000 on an outstanding 1996 city Community Development loan.
Records show the business has not paid any city or school property taxes since 2000, the same year the business filed for Chapter 11 bankruptcy, temporarily protecting it from landing on the city's property auction list.
Properties usually go on that list two years after delinquent taxes have been recorded, according to the City Controller's office.
Dana Gagliardo is owner of the restaurant at 710 19th St., which owes $45,000 in late county, school and city property taxes. The building is assessed at $100,000.
Now the city's loan department is looking into a $46,000 Community Development loan on the building, a mortgage signed by Gagliardo and her brother Daniel, who was the city's director of environmental inspections from 1996 to 1998.
Their mother, Theresa Gagliardo, filed for bankruptcy on behalf of Gags Inc., the corporation she headed, a proceeding that canceled $30,000 still owed on a separate $50,000 Community Development loan she took out for the restaurant in 1991.
Daniel Gagliardo said Friday he believes the bankruptcy case wiped out both loans. The city's Senior Business Development Officer Ralph Aversa said he was told the same thing when he began working for the city Law Department in 2004.
However, Aversa decided to open the Gagliardo loan file last week, and said he now believes the Gagliardo children still owe the city more than $38,000 for the 1996 mortgage. Aversa said the last payment received was in March 2000.
"This whole thing came up because we started getting calls about the tax waivers," Aversa said. "The feeling is because . . . Chapter 11 dissolved this loan, the mortgage should also have been dissolved."
Aversa said paperwork shows the 1991 loan to Theresa Gagliardo was discharged in late 2003, but he has no such documentation for the 1996 loan.
"Ralph can say whatever he wants," Daniel Gagliardo said, "but I think it's all political."
Bankruptcy papers show Gags Inc. owed money to dozens of businesses and agencies.
"I would think any amnesty program they would enter into would have to include a resolution for payback on the loan," Aversa said.
The Council voted last year to forgive city interest and penalties for a former tavern at 2701 Pine Ave., as long as the outstanding tax bill was paid within two weeks. Rotella said Gagliardo later asked him to help out her business. The Council has delayed a vote on the matter and is instead looking into a one-time tax amnesty program for local property owners.
City records show Gagliardo owes about $6,500 in city penalties. While the Gags Inc. bankruptcy notice lists the case as being closed on Aug. 6, 2002, the city has kept the building off its auction list in past years, even though property taxes have not been paid. It is now on "the radar screen for the next auction," said Keith Martineau of the city billing and collection office.
Property owners can avoid foreclosure if they pay a certain amount of overdue taxes. The city sold 223 foreclosed properties last year for $1.2 million, City Assessor Dominic Penale said.
Rotella defended the waivers, saying, "Pine Avenue is the Main Street of Niagara Falls."