Montgomery County stands to lose nearly $25 million in a Norristown redevelopment project gone sour, Commissioners Chairman Josh Shapiro said Tuesday.
Under the previous administration, the county invested significant public grants and loan guarantees to redevelop the Logan Square shopping center.
One office building was constructed, but it remains only half-occupied. The retail portion of the site is underutilized and run-down.
"It's hard to see how it was ever viable. It's certainly not viable now," Shapiro said at a news conference.
County finance chief Uri Monson said rent from the handful of tenants doesn't cover operating costs.
The redevelopment process began in 2007, when Charles Gallub, of Develcom and Johnson & Markley, proposed building a film studio and film school to replace the shuttered Sears, Roebuck & Co. store at Markley Street and Johnson Highway. The movie studio soon backed out.
The subsequent plan called for an office and retail park, but the anchor tenant shrank due to the recession, and the developer failed to attract new tenants, according to a county analysis.
In May, the property entered foreclosure - and due to a highly unusual arrangement, the county was left on the hook for much of the debt.
In 2010 and 2011, the county agreed to subordinate its investments - meaning that if the project failed, investors would get their money back before the county.
Those investments include:
$2 million Renaissance loan.
$6.2 million guaranteed revenue bond.
$10 million Housing and Urban Development loan, guaranteed by the county.
$500,000 Community Revitalization loan.
$140,000 from the Norristown Enterprise Zone Revolving Loan Fund.
$1.4 million bridge loan from the state Infrastructure and Facilities Improvement Program.
$1.5 million Brownfields Economic Development Grant.
$1.9 million grant incentive for the office tenant, USMaintenance, to remain in Norristown.
In addition, Norristown guaranteed a $5 million HUD loan and the commonwealth provided $7 million in Redevelopment Assistance Capital funding.
Foreclosure proceedings are expected to take six to nine months.
The resulting debt payments are expected to put a dent in the general fund, Shapiro and Monson said.