THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, March 23, 1996 TAG: 9603230244
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY ALEX MARSHALL, STAFF WRITER
LENGTH: Long : 102 lines
HUD Secretary Henry G. Cisneros has told top city and state leaders that Norfolk might not get a critical $33 million in federal loan guarantees to build the MacArthur Center mall unless it does more to guarantee that the mall will create jobs for poor people.
Specifically, Cisneros said Thursday that the city must guarantee that 51 percent of the jobs at the Nordstrom department store, which will be built with the loans backed by the federal government, will ``be held'' by low-income residents, not just ``made available'' to them, said Mayor Paul D. Fraim and Vice Mayor Paul R. Riddick.
Fraim, who met Thursday with Cisneros in the offices of U.S. Sen. Charles S. Robb, predicted that the differences should be cleared up in time for another meeting scheduled in Washington in two weeks. Fraim called it more a matter of semantics than substance.
``We had a frank discussion about HUD moving ahead to sign the loan documents,'' Fraim said Friday. ``The secretary wanted to clear up some concerns about jobs being held, and we're working to do that.''
Riddick, who represents many of the low-income residents targeted by the HUD loan program, said he also preferred that the jobs be guaranteed to the poor, not simply offered to them. He said he learned at Thursday's meeting with Cisneros that requiring guarantees was an option.
``If we can clear up those points, we are just about assured of those loans,'' Riddick said.
Nordstrom officials, who would ultimately have to approve any changes in the employment policy at their store, could not be reached for comment Friday afternoon.
The more stringent interpretation of rules by the Department of Housing and Urban Development comes on top of two other hurdles that surfaced this week.
On Thursday, the Norfolk Federation of Business Districts filed suit against the city to stop the mall. The organization argued that it is wrong for its members to be forced to subsidize construction of what will eventually be their competition.
As well, the state Department of Historic Resources informed the city that it can't begin construction until it performs a more thorough historic survey of the site.
Thursday, Cisneros met with Robb, Fraim, Riddick, City Manager James B. Oliver, R. Patrick Gomez of the Norfolk Redevelopment and Housing Authority, and U.S. Reps. Owen B. Pickett, a Democrat whose 2nd District represents much of Norfolk, and Robert C. Scott, a Democrat whose 3rd District represents parts of Norfolk, including a large minority base.
The meeting was called, Fraim said, because the city was concerned about HUD's delay in executing the loan guarantees.
The city is working to get $33 million in those guarantees under a HUD plan known as Section 108. Under Norfolk's plan, HUD would back $33 million in private bank loans to build the Nordstrom department store. The Seattle-based chain is the centerpiece of the upscale mall that is intended to draw people from throughout the region to shop in downtown Norfolk.
Should the mall fail and the city default on the loan, the plan would call for HUD to divert enough of the $7 million the city receives annually in Community Development Block Grant funds to repay the loan.
The city's theory behind using poverty-relief money to guarantee a loan to build a luxury department store is that Nordstrom will make an extra effort to give jobs to low-income residents.
The nature of that obligation was at the heart of the discussion between Cisneros and city officials. Although it is the first time it would be used this way in Norfolk, the Section 108 program has helped build hotels, department stores and malls in other cities across the country.
In addition to the concern about whether jobs would be guaranteed to low-income residents, Cisneros said he was not convinced the department store would create enough jobs to justify the $33 million.
Similar concerns were raised in the lawsuit filed Thursday by the Norfolk Federation of Business Districts against the city and HUD.
Under current city calculations, the Nordstrom department store would create at least 350 jobs for low-income residents, which translates to about $90,000 per job based on the $33 million in loan guarantees.
According to those at the meeting Thursday, Cisneros said that he would rather the store create at least 600 jobs for low-income residents, which translates to $50,000 in federal guarantees per job.
City officials pointed out that the mall included stores other than Nordstrom and is expected to create more than 3,000 permanent jobs. However, since the federal money is being used just to build the Nordstrom anchor, only jobs there fall under the federal low-income guarantee provisions.
Fraim and Riddick said Cisneros seemed somewhat reassured when told that the city planned to target all 3,000 jobs at the mall for low-income residents through a coordinated job training program.
HUD has already approved the $33 million loan guarantees in concept twice, once in November 1994 and again at the beginning of this year. But the federal department has not actually executed the agreement, Fraim said, which means HUD can still change the requirements of the loan guarantees.
Because of this, the city has had to scramble to meet regulations which have changed frequently over the past few years. Fraim said Cisneros had a different interpretation than the HUD officials who had been talking with Norfolk officials regularly.
The HUD secretary said the city could forgo the Section 108 money and seek the $33 million from private sources if it cannot get HUD approval, according to Riddick. But it was unclear whether the project could proceed without the federal loan guarantees. by CNB