ELBERTON, Ga. - An Elberton retailer wants to keep the lease on the downtown building she says she's invested almost $7,000 in as part of a county revitalization program.
The Elbert County Commission wants to renegotiate her lease - and those of other tenants - so it can sell that building and seven others on the Elberton square to recoup money from an economic development loan it had granted to a North Carolina entrepreneur - a loan the entrepreneur defaulted on in April 2001.
The state Department of Community Affairs says it wants its money back - Federal Community Development Block Grant funds allocated to Elbert County for an until-now successful revolving loan fund used to finance redevelopment efforts in blighted areas.
A foreclosure on the defaulted loan doesn't matter to the tenants who have opened businesses in the eight buildings on North McIntosh Street in downtown Elberton - they don't want to move.
Beth Campbell, who opened a franchised Merle Norman Cosmetics Studio in one of the buildings in August 2000, said she has spent close to $7,000 on sheet-rock, flooring, lighting and shelving. She doesn't want to lose the time and money she has invested.
"It'll be the same thing all over again if I have to move," she said. "If I do ever have to move, I want it to be on my own terms."
The sticky situation goes back to 1998, when North Carolina entrepreneur Joe Fields obtained $675,000 in loans from the Elbert County Revolving Loan Fund with plans to renovate the vacant buildings.
The loan fund was seeded with federal block grant funds in 1987. The state Department of Community Affairs administers block grants and consequently monitors the loan fund.
Loans from the fund are issued for projects designed to revitalize blighted areas or create jobs for low- to moderate-income people. The borrower repays the loan at a discounted interest rate.
"His (Mr. Fields') idea was to come in, take a group of vacant buildings and renovate them," Elbert County Administrator Charles Kinney said.
With his loan, Mr. Fields bought a block of buildings in downtown Elberton and opened a sports bar - the City Club. He started cosmetic renovations on the buildings and took on tenants, including the Merle Norman Cosmetics Studio, the Downtown Cafe, Bella Mia Hair Salon and Time Square Cafe.
"He had made such fantastic deals (on leases)," Mr. Kinney said, adding that Mr. Fields charged low rents and offered options to extend the 15-year leases. The leases also gave tenants the right to be considered first if the buildings were ever sold. But problems soon arose.
"In essence, they were undertaking a very, very complex downtown revitalization project," said Brian Williamson, director of the DCA's Office of Economic Development.
Mr. Williamson said a routine check on the county's loan program in 2000 showed deficiencies in record-keeping and other areas regarding the loan Mr. Fields got for the development.
"You will have bad loans on occasion, but we expect local governments to step in quickly," Mr. Williamson said.
The DCA imposed sanctions on the county, requiring officials to forfeit the revolving loan fund's remaining $350,000 and stop issuing new loans.
"It just hurt a real successful program, and it hurt a lot of people," he said.
The county had used the loan program for a number of other businesses, including Gardens Restaurant, Fibers and Fabrics of Georgia and Elberton Mills. Under the sanctions, the county can maintain existing loans and send the loan payments to the DCA.
Mr. Williamson said Elbert County officials have been operating under the guidelines. One day, the county might be able to fully revive the program, he said.
Meanwhile, the renovation project was proving to be a financial drain for Mr. Fields, Mr. Kinney said. Renovating the eight buildings involved more work and money than he first thought.
"He had done a lot of cosmetic work, but he didn't have the experience as a general contractor," Mr. Kinney said. "He didn't cover the mechanical, electrical and plumbing (renovations)."
Mr. Fields defaulted on the loan in April 2001, and the county had to foreclose on the property in November.
The county planned to sell the buildings at an auction, but the tenants' existing leases make the property less desirable to investors.
Mrs. Campbell filed a complaint in Elbert County Superior Court, asking a judge to ensure the tenants' leases would be honored if the county sold the buildings.
Elbert County Superior Court Judge John H. Bailey ruled June 27 that the county has the right to terminate the tenants' leases to increase the value of the property, while the tenants have the right to appeal the court decision.
"Basically, the judge didn't give either one of us what we wanted," said Richard Campbell, Mrs. Campbell's husband and attorney.
Mr. Campbell said the tenants plan to appeal the decision, and the county's auction is now on hold pending the completion of the appeals process.
Now, county officials hope to work out a deal with the tenants. Mr. Kinney said officials want to draw up new leases for the businesses before selling the buildings.
"Mr. Kinney has been very supportive. He's been very helpful," Mr. Campbell said.
Officials already have forged a short-term, one-year lease with the new owners of the City Club. New leases for the buildings' other tenants have not been worked out yet.
"We want to be fair to the people who are there," Mr. Kinney said. "We don't want to put anybody out. It (the development) creates jobs. They (businesses) pay taxes. Everybody benefits."