Mayor Lovely Warren submitted legislation to City Council asking for approval of a $1.5 million loan to Morgan Management for a proposed riverfront apartment complex on Court St.
The downtown building would have 111 apartments. The total project would cost $33 million. Morgan secured a $23.6 million bank loan this month. The loan requires Morgan to put in $9.997 million in equity, “which include up to $1.5 million funded by the City of Rochester as a loan to the Borrower.”
This loan should give City Council pause for several reasons. The biggest reason is Robert Morgan is under investigation by the FBI. He allegedly borrowed against his properties for more than they’re worth, a problem when the mortgages were then sold to Fannie Mae and Freddie Mac. There are questions about how much equity he has in his deals. He also admitted to the Buffalo News that he hides the true value of his properties from tax assessors by using shell companies and under-the-table transactions.
Morgan is innocent until proven guilty, but legitimate questions have been raised about the way he does business. Furthermore, a grand jury is reportedly meeting, which means indictment could be imminent. What kind of message does it send for the city to loan money to a businessman under federal investigation?
— Gary Craig (@gcraig1) September 28, 2017
Morgan has already received taxpayer support for this project. He is getting sales, mortgage and property tax exemptions worth $4.5 million. The city is also investing $4.5 million in riverfront infrastructure related to the project, including a promenade. The city and county claim they will get $8 million in property tax revenue over the next 10 years on property that’s not bringing in revenue now. That’s true, but Morgan will likely bring in at least $2 million a year in rent. Who’s really making out on this deal?
It’s disturbing to see Morgan get a mortgage that relies on city taxpayer support without taxpayers knowing anything about this until now. This has the effect of putting City Council in a position of having to approve the $1.5 million loan or be accused of letting the project go belly up. Why can’t Morgan finance the gap on his own?
Warren will likely say the loan is in exchange for Morgan agreeing to 11 affordable apartments and minority and women hiring components. If we’re serious about hiring and affordability, we can codify those requirements for taxpayer-backed projects. Unfortunately, “inclusionary zoning,” the sprinkling of affordable units in high-end projects, will make politicians feel good, but won’t do much to solve the affordable housing crisis.
Morgan and his connected LLCs have donated $21,250 to Warren and her political action committee since 2014. Warren and the city must take a giant step back when it comes to Morgan Management – at least temporarily. The fact the mayor introduced this legislation shows a total disregard for the optics of doing business with an FBI target. Don’t take his money. Don’t loan him money. There are simply too many questions.
Author: Rachel Barnhart