01/22/04 — City has trouble with Homestead land

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City has trouble with Homestead land

By Barbara Arntsen
Published in News on January 22, 2004 2:04 PM

The city of Goldsboro is running into some problems in getting its land back from Project Homestead, which was supposed to use the land to build houses for flood victims and first-time home buyers.

The organization has borrowed money against the property even though the city's agreement was that if the property was not developed it would revert back to the city.

Project Homestead, a nonprofit Greensboro-based business, was responsible for building homes in the Harris Streets Estates intended for flood victims and first-time home buyers.

"Our agreement with Project Homestead was that we would give the land, and they would build and sell," City Attorney Harrell Everett said. "If they didn't, then the property would be returned to us, unencumbered."

Last week Everett and City Manager Richard Slozak found out that Project Homestead had borrowed over $60,000 on the empty lots that should revert to the city.

Problems within the organization began to surface in September, when the Rev. Michael King, former president of Project Homestead, resigned his position as president amid rumors of financial misconduct.

King died in December. The state's chief medical examiner has not issued an autopsy report, but published reports say authorities do not suspect foul play.

A recently released audit of Project Homestead uncovered a number of financial problems within the organization.

Everett said that Project Homestead had hired Kevin Price to resolve its financial problems.

"We met with him Jan. 12, and it was a fruitful meeting," Everett said.

"The meeting was to determine about the 38 lots where there are no houses constructed. We're demanding that those lots be returned to the city because the agreement was that if they didn't develop them, they would be returned to us."

What Everett and Slozak didn't realize, until the meeting, was that the troubled company had borrowed money against the land.

"They spent money on the property that didn't need to be spent," Everett said. "They borrowed $66,599.50, and the Bank of America doesn't want to release the deeds until they receive their money."

The city received a $570,000 grant from the state in 2000 to develop infrastructure for the project. The grant was contingent upon the city developing that land for either flood victims or first-time home buyers.

Everett said that if the lots aren't developed according to those categories, then the city would have to pay back $10,000 per undeveloped lot to the state.

The city has met with the state regarding the problems with Project Homestead.

"They know the plight of Project Homestead," Everett said of state officials. Everett said the state would likely not charge the city if the city takes back the lots and has houses built on them.

Everett said that Price of Homestead was setting up a meeting between Project Homestead, the bank and the city regarding the land.

"It's a complicated issue, and there are a lot of players," Everett said.

King came to Goldsboro four years ago on the recommendation of former Gov. Jim Hunt.

Goldsboro's City Council in 2000 donated over 30 acres, and Project Homestead promised a "housing blitz for flood victims." The homes would be offered to former flood victims, and first-time home buyers, at reasonable prices.

State and federal grants were used to help buyers make their down payments, but the homeowners pay their mortgages.

The "blitz" fizzled, and the company only built 38 houses. Around 20 of those 38 homes have had a number of construction problems, which the city's community affairs department has been trying to resolve.

Some of the complaints are new, and some have been dragging on for more than a year.

"There were some problems with Project Homestead wanting to overvalue the properties," Everett explained. "Since we had given them the property, we couldn't understand the prices of some of the houses. They weren't prices for the Goldsboro market, but were more in line with Greensboro prices."

After several meetings with King, the prices were reduced, Everett said.

Goldsboro has not conducted an audit on Project Homestead like Greensboro.