READING., Pa. — Reading City Council in its full meeting on Monday discussed a twice-tabled resolution that would forgive a $1.475 million debt to the Reading Housing Authority.
The housing authority has requested that a loan given to the original owner of River Oak Apartments on River Road be canceled so that the authority, which now owns the flats, can take on new debt to carry out necessary repairs to the 72 flats .
Stacey J. Keppen, Executive Director of the RHA, explained how serious the situation is. Keppen said the request for loan forgiveness is driven solely by the authority’s desire to preserve an anchor development.
“We find ourselves concluding that there is no environment in which this business is profitable for us for the foreseeable future,” Keppen said. “There is growing evidence that without debt relief we will not be able to obtain open market financing from even the most community-based lender.”
Keppen said that without the debt relief, the development will have an operating loss of $46,000 per year by 2027, and by 2038 the cumulative operating loss would exceed $600,000.
“Our ability to meet this obligation in its current form is virtually impossible,” she added.
Edwin Stock, a solicitor for the housing authority, pointed out to council that it was a former administration that had asked the authority to assume ownership of River Oak.
“Because the previous owner had made it clear that he was going away, there was a real concern that the property would fall into the hands of a private owner – a sleepy owner – to be completely frank,” said declared Stock. “So we were specifically asked to think about it, and we did. I think it’s relevant.”
Councilor Donna Reed said she hoped the council could support the cancellation of the loan.
“I think it’s important for the public to understand that money is being reinvested into this property to make it a better housing situation for residents,” Reed said. “It really is public money for public purposes.”
Frank Denbowski, chief of staff for Mayor Eddie Moran, said the administration fully supports canceling the loan.
“We recognize the need for capital improvements, which are necessary for us to continue to have decent and safe housing,” Denbowski said. “I think it’s really important that we take the lead because the administration is wondering what the alternative would be. It wouldn’t be good.”
At two previous council meetings, frequent commentator Reverend Evelyn Morrison strongly criticized the loan forgiveness proposal. Last Monday, Morrison emphasized that the city is not a lending institution.
“Your fiduciary responsibility is to be able to manage our tax finances well,” she said. “Whenever an entity obtains a loan through community and economic development funds, it is their responsibility to repay it so that other people can benefit from these revolving loans.”
Council Chair Johanny Cepeda-Freytiz said she appreciates that the River Oak Apartments are very well maintained and offer a high quality of life.
“However, I think as a city we have to be very consistent with our practices,” Cepeda-Freytiz said. “Because we’re choosing to forgive one loan but not forgive the other, so I’d like to think about that more. I’d like to talk more with the city attorney to determine what the best practice is in this case.”
The board will consider the resolution to cancel the $1.457 million loan next Monday evening.