The previous Montgomery County Board of Commissioners is defending the Norristown Logan Square development, which is in foreclosure and could cost the county more than $20 million.

Joseph M. Hoeffel III, the Democratic vice chairman who led the commissioners' grant- and loan-making negotiations from 2009 to 2011, said the project was desperately needed to preserve jobs and revitalize the municipality.

Hoeffel said he regretted that the project has failed financially. But the investment was not a total loss, he said, because it kept a large employer from moving out of Norristown. "The jobs are still there. There's a Class A office space in Norristown. And there's a parking garage that wasn't there before."

The primary tenant, USMaintenance, has about 400 employees. In 2009, when it accepted a $1.9 million county grant, the company promised to expand to at least 600 employees.

James H. Matthews, the former commissioners chairman, said he supported the project because "the excitement was unanimous" among developers and municipal, county, and state officials.

The fallout from the project has put Matthews and Commissioner Bruce L. Castor Jr. in a rare state of agreement. Both are Republicans who oppose the general idea of government intervention in private enterprise. But the situation in Norristown was desperate, they said.

"If you look at the downward spiral Norristown has been in the last 100 years, sometimes you jump at the opportunity," Matthews said.

Castor, the only commissioner to win reelection in 2011, said that when he voted on the plan, he was unaware of several details that heightened the county's risk. Chief among them was a subordination clause that gave senior lenders control over the project and first right of repayment in the event of failure.

"I would never have supported any subordinate position," Castor said.

Matthews said he didn't know about the subordination, but even if he had, "I would have taken the risk."

Hoeffel said all of the commissioners were made aware of the subordination clause.

"It seemed worth it. We were careful and thoughtful and we did our due diligence," Hoeffel said.

The developer, Charles Gallub of Develcom, stopped making debt payments in June, leaving his cosigners - the county and Norristown - to pick up the tab.

The senior investors, Logan Lender, filed the foreclosure against Develcom in May.

Uri Monson, chief financial officer under the current administration, found that under the original creditor agreement, debt payments would balloon beginning in 2018: "Several million dollars in additional moneys will be directed annually to the senior lender, while the county shortfall will grow beyond $2 million a year."

Hoeffel and Matthews said it was too early to tell how much the county might lose on the project. The federal loans could be forgiven or altered; a sale of the property could recoup some losses; or the site could attract new tenants and become the booming hub of which officials dreamed.

But before the county sees any money, Logan is entitled to more than $34 million in principal, interest, and accrued penalties - as well as returns of more than 14 percent a year, according to Monson.

Contact Jessica Parks at 610-313-8117, jparks@philly.com or follow on Twitter @JS_Parks.