The manner in which the Buffalo Economic Renaissance Corp. is being dismantled gives us pause and hope. Pause, due to the slow pace of change and the bare trickle of details, and hope that whatever process is put in place works.
The corporation is the arm charged with granting small loans to help entrepreneurs by acting, in a way, as lenders of last resort. It has been unofficially shut down for more than a year by the administration of Mayor Byron W. Brown.
This is an agency with $40 million in assets that provide the ability to lend up to $5 million a year, according to agency officials. BERC's loan activities officially ended almost a year ago under orders from the mayor, even though a full complement of staff was kept on the payroll until recently. In February, at his State of the City address, Brown announced he was unraveling BERC. This was about a year after news broke about a loan scandal involving a failed restaurant venture, One Sunset on Delaware Avenue.
An audit by the city comptroller found that the loans involved in One Sunset were done without approval of the board. The board, whose membership was composed mainly of bankers, real estate professionals and community leaders, expressed misgivings about the inexperience of owner Leonard Stokes, who later defaulted on those loans.
A senior staffer at BERC, who later helped manage the restaurant, arranged $160,000 in public loans and grants to One Sunset. There has yet to be a public answer if she did it on her own or under direction from higher ups in City Hall. The saga continues as a federal inquiry begins a new phase.
In order to qualify for certain federal programs, a majority of BERC's board members had to be independent of City Hall. Now, much of the work BERC did will be moved to the Buffalo Urban Renewal Agency, a board the mayor controls.
BERC has historically been a troubled agency rife with political requests and considerations by Council members and staffers who sometimes circumvented the board's authority by piecing loans together for one entity, while keeping to the $50,000 limit they could grant or loan without board approval.
Acting BERC President Dennis M. Penman has done an admirable job with what he's been handed, but he's just one person and this has been a troubled agency for much of its 32-year history. BERC needed to be reformulated, but how?
The administration has been sketchy on details, ignoring a reporter's request for specifics. But some of what The News' investigative reporter discovered involves about $20 million in cash assets and receivables derived from federal sources being transferred to the Buffalo Urban Renewal Agency, which would set policies for future lending and grant programs and provide seed funding.
It also involves the shifting of about another $20 million in assets, mostly real estate, as well as some nonfederal income to the Buffalo Urban Development Corp., a subsidiary of the Erie County Industrial Development Agency.
The transition has been staunchly defended by some, arguing that there's been a carefully considered process involving consultation with knowledgeable outsiders, the work of a local law firm and those who have worked within the system. The decision, some sources insist, is a sound one.
Will it work? The closure of BERC and transition of duties represents the mayor's third reorganization of economic development in four years. But the process looks like another example of the mayor's troubling pattern of making splashy public announcements, then discovering the complexities, then studying the matter, and finally, much later, implementing a solution. It's like selling your home and, only as the date for you to vacate approaches, finally beginning to look for a new place to live.
Abolishing an agency requires working as long as it takes to develop and to implement a new plan. It should also involve a plan for a smooth transition so that important functions continue until the new approach is implemented. BERC has made bad loans but plenty of good ones, as well. For more than a year, small businesses have been unable to get loans that BERC is charged to provide to them. And even now, the plan to move forward is murky.
It's the mayor's responsibility to make sure all these agencies are run well. Now that he has killed one agency, it is his responsibility to not harm other agencies such as the Urban Renewal Agency and the Urban Development Corp. It is long past time for Brown to release the details and to publicly describe how his proposed improvements will lead to the better and more prosperous city that we all hope for.