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A LOAN AGAIN, NATURALLY

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"That wouldn't have happened" if it hadn't been for a $350,000 MOED loan, says Brantley, the center's executive director. "We would not have been able to do this."

It's not hard to find others who will sing MOED's praises. John Hickenlooper, developer of the Wynkoop Brewing Company in lower downtown, says the Wynkoop "would not exist" if it wasn't for a 1988 low-interest loan from the city. Hickenlooper says it cost him $575,000 to refurbish the Wynkoop building and turn it into a restaurant, but he could scrape together only about $450,000 from investors and a private lender. The city stepped in to fill the gap.

Today the Wynkoop is a quintessential MOED success story. The restaurant thrived after the city's financial jump-start, MOED was repaid in full, and the popular brewpub helped speed the rebirth of LoDo, now one of Denver's real estate hotspots. "We paid the city, in sales tax last year, over $140,000," Hickenlooper adds.

MOED has been making such loans since its founding in 1985. As with similar economic-development agencies in other American cities, virtually all of its funding comes in the form of annual grants from the U.S. Department of Housing and Urban Development. MOED gets about $2.5 million a year from HUD, approximately 80 percent of which it redistributes as low-interest loans. The agency spends the remaining $500,000 on administrative costs, including salaries for Lysaught and half a dozen other employees. MOED also collects another $2 million per year in interest on its existing portfolio--money it sends back out the door in the form of new loans.

As of last September, MOED had made 385 loans totaling more than $43 million during its ten-year history. Of those, 153 have been paid off, while 197 remain outstanding. Thirty-five loans worth about $4 million have fallen into default; an additional seventeen are categorized as "liquidations," which means the agency expects them to fail in the future. But Lysaught says that through the seizure of real estate and other loan collateral, the city has lowered its actual loan losses to less than $3.4 million--even though in the process it has been forced to serve as a de facto landlord on failed properties. By comparison, he says, MOED has earned $3.9 million in loan interest over the years.

Local HUD administrator Roy Porter says Denver's loan program "is one of the best" in the federal agency's six-state Rocky Mountain region. Porter, who's seen delinquency rates climb above 50 percent in other cities, says if anything, Denver is too conservative in its approach to economic development. HUD allows cities to grant, rather than loan, federal money to projects in some circumstances--something Porter says Denver should do more often. "I've criticized them for being too strict rather than not strict enough," Porter says.

Lysaught says he has "problems" with simply giving money away. "I'm not sure you're a [viable] enterprise if you need grants," he says. And over the years, MOED has concentrated its financial firepower by focusing on a handful of troubled business districts, such as Welton Street in Five Points and West 38th Avenue on the city's north side. On Santa Fe Drive, another target zone, MOED has poured more than $1 million into various projects: $236,000 for a radio station; $499,000 for the Denver Civic Theatre; $178,000 for a Grease Monkey franchise; and almost $200,000 for three different restaurants.

Max Wiley's predecessor at the MOED helm, John Huggins, says such loan "agglomeration" gives MOED the best chance of turning a problem neighborhood around. The area around the Mayan Theatre on South Broadway is a prime example, he says: In the mid-1980s, a $120,000 MOED loan helped save the theater from destruction, and subsequent loans were instrumental in turning the surrounding blocks into a vibrant commercial and restaurant district. "It's been almost ten years since MOED made a loan there," Huggins says. "It worked."

Chris Citron, a neighborhood activist who led a fight to save the Mayan, agrees. Citron remembers when the Mayan, now the city's premier venue for art films, was a sleazy $1 movie house. The whole area, Citron says, "had become skid row. Now it's doing wonderful things."

Despite MOED's apparent successes, the agency has no shortage of the kind of loans that make taxpayers wince.

Take the City Spirit Cafe. Denver businessman Morton Zeppelin got a $50,000 loan to open the restaurant at 14th and Blake in 1986. Since then, however, Zeppelin has run into significant trouble with the Internal Revenue Service. Until last October the IRS had an $18,500 lien on the cafe for delinquent unemployment-insurance payments. Another IRS lien--this one for more than $100,000--still encumbers the property, records show, though Zeppelin says that lien is "not at all" related to the City Spirit venture. "Everybody goes through some bad times," he says. Zeppelin insists his MOED loan has never been at risk of default. "The loan is being paid off," he says.

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Arthur Hodges