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U.S. PRESSES FOR REPAYMENT OF CANAL LOAN ACTION COULD POSE ROADBLOCK IN FALLS TO REHABILITATE HOMES

Federal officials are pressuring the state to repay $13 million it owes on a loan floated a decade ago to buy out hundreds of Love Canal homeowners.

If successful, the move could put another roadblock in efforts of the Love Canal Area Revitalization Agency to rehabilitate and put some 250 long vacant homes on the market.

In a related development, the canal agency also faces a potential lawsuit to block resettlement. Toxic waste activist Lois Gibbs said Thursday that a national environmental group is preparing a legal action to block resettlement if U.S. Environmental Protection Agency Administrator William K. Reilly denies her request that he intercede and block resettlement.

Ms. Gibbs said Reilly promised last week to make a decision on the request by Feb. 9. Ms. Gibbs, head of the Love Canal Homeowners Association, also leads the Citizens Clearing House for Hazardous Waste in Arlington, Va. The New York Environmental Institute has charged that the federal agency's environmental review does not meet legal requirements.

As word of the proposed sale of the homes filtered through to the Federal Emergency Management Agency, its officials are once again pressing the state to start making payments. A FEMA source who asked not to be identified said the agency could either withhold the money from a future emergency grant, block the sale of homes or place a lien on the proceeds of any sale.

Instead of using profits from selling homes to repay the federal government, the Love Canal agency wants to keep the money to repair more homes for sale.

Under an agreement reached between then-Gov. Hugh L. Carey and former President Jimmy Carter, federal officials gave the state $7.5 million and loaned them another $7.5 million with the understanding that the loan would be repaid from the proceeds of the resale of the homes once remedial work was completed.

The state also sold bonds and made a $5 million loan. The canal agency also technically is supposed to repay a $5 million loan, but each year it certifies that it hasn't got the money. Thus far, the state has appropriated money each year to make repayments on bonds that were sold to pay for acquiring homes. State officials said Gov. Cuomo's proposed budget includes $250,000 for the purpose.

The $7.5 million loan, with interest, now totals $13.18 million, according to FEMA spokesman Carl Suchocki.

The Love Canal agency plans to sell about 250 homes it says are worth between $40,000 to $60,000 each. Deducting costs of rehabilitation and fees involved in the sale, the proceeds from selling the homes would probably not cover the cost of repaying the loans. Assuming the overall average sale price would be $50,000, the net proceeds would be $12.5 million.

Health Department spokesman Peter Slocum said the state "doesn't necessarily believe it owes any interest."

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