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A local nonprofit was expected to collapse after its former head and an ex-senator were convicted of defrauding it of millions. They are currently serving month No. 10 behind bars — one year and one day and 55 months, respectively. Now as a result of an assessment, the nonprofit could get back to helping the neighborhood where it is based pending a judge’s approval.
“Following years of highly publicized litigation, my assignment as interim conservator of [Citizens’ Alliance for Better Neighborhoods, 1137 Wharton St.] has been to determine whether, in colloquial terms, there was indeed a baby immersed in a lot of dirty bath water,” President and CEO of the Center City District Paul Levy wrote in his report to the court. “If so, could it be lifted out, nurtured to stand on its own and set forth on a new path of community benefit, transparency and self-sufficiency? After six months as interim conservator, I conclude that the answer to each of those questions is ‘yes.’”
Levy, who was appointed to the job in December, recommended renaming the organization Passyunk East Revitalization Corp. with it focusing on the a subsection of the Passyunk Square neighborhood from Federal to McKean streets and from Broad to Ninth streets.
The steady stream of income from the nonprofit’s real estate and the fact that it already owns the needed equipment were the keys to Levy’s decision.
In his 10-page recommendation to the court filed June 2, Levy described the potential new nonprofit.
“Picture then, a more modest organization whose mission is the continuing improvement of the Passyunk Avenue retail corridor and the enhancement of the residential blocks,” he wrote.
And this may allow the new corporation to streamline cleaning services with the East Passyunk Avenue Business Improvement District, which currently devotes roughly $30,000 to a four-day-a-week sidewalk cleaning.
“If Citizens Alliance was able to take over street cleaning, we obviously would have more resources to put back into the corridor for beautification or capital improvement projects,” Renee Gilinger, main street manager of the district, said noting the potential of reinstating building façade improvement that last year’s state budget cuts halted.
The court reviewed the recommendation June 23 in a Harrisburg hearing, but Commonwealth Court Judge Dan Pellegrini requested more information by September.
In his report, Levy listed the assets sold that helped to eliminate about half of its $1 million debt. Those included two trash trucks and a dump truck that netted the nonprofit $56,201 at an April public auction and a John Stobart painting, which former Sen. Vince Fumo purchased for $150,000 in October 2003 using Citizen’s Alliance funds, that will be sold for $25,000 to $45,000 Aug. 21 to 22 at the Marine & China Trade Auction in New Hampshire.
The nonprofit also aims to close sales for the Christopher Columbus Charter School, 1240-52 S. 13th St., and Fumo’s former office, 1208-12 Tasker St., among others.
“We think it’s a good report and a good way to go,” Attorney Thomas A. “Buck” Riley of the Exton-based law firm Riley Riper Hollin & Colagreco, said, “and I think the judge’s indication — he doesn’t want to take any action yet until he sees what these question marks are relating to some of the assets particularly Covenant Partners.”
The majority of the conversation with the judge pertained to outstanding issues including the ’02 $2.5 million investment in Covenant Partners, a Delaware corporation. Two years ago, representatives from the company offered to pay $700,000 to buy back Citizens’ Alliance’s share, but it refused to provide information on how much the nonprofit owns and what the actual value may be.
Levy submitted an audit for ’06 through ’09 to the judge last week and plans to tie up any remaining loose ends prior to their next meeting and end his tenure with the organization.
“[Pellegrini] asked for more information and clarification in September,” Levy said. “If all goes well, the organization will be out of debt and it would be potentially in a position to set more staff in place, so I see myself continuing to phase out by fall.”
The Office of Attorney General and the organization’s council — Riley and Joe Lundy — agreed that Citizens’ Alliance was a mere victim of the wrongdoings and its assets and equipment could still be an advantage to the community if used properly. Originally, the office sought to remove the 11 board members and revoke its nonprofit status. However, current officers agreed to step down and subsequently were removed from the lawsuit along with former board members.
Fumo and past executive director of the nonprofit Ruth Arnao were convicted for misspending Citizens’ Alliance funds. Fumo also was convicted of defrauding the state Senate and the Independent Seaport Museum. The Attorney General estimates the duo had defrauded the nonprofit of $1.9 million — up from $1 million the U.S. District Attorney’s Office alleged — $676,000 of which may be returned, but is pending an appeal.
The nonprofit still owns 22 properties including under its three forprofit entities. Those, along with its equipment, account for $15.9 million in assets as of December ’09 although that number has most likely decreased due to the declining market, according to Levy.
Each year between ’06 and ’09, according to Levy’s report, the nonprofit spent $1,028,727 more than it collected on average for four years prior to almost depleting funds by April ’09 when services were brought to a halt and staff members were laid off.
While Levy was surprised with the wide variety of tenants on the avenue, there was no disputing that the organization was in debt, which was far from the public’s perception.
“In sum, there was no ‘pot of gold’ to be found inside the Alliance’s offices in December 2009,” Levy wrote in his report. “On the contrary, it was an organization deep in debt. Its primary assets consisted of an inventory of real properties that were, quite significantly, free, for the most part, of mortgages or liens.”
Prior to halting services last year, the maintenance programs were primarily funded through grants including Penn’s Landing/PIDC Joint Operating Committee (PPJOC). More than $2.8 million was spent on cleaning and improvement services between ’04 and ‘07 while only $1.3 million in grants were brought in before being suspended in 2008 due to the accused wrongdoing.
The city’s Office of the Inspector General seeks $5.5 million plus interest to be returned to PPJOC as it was spent inappropriately. This request along with the ongoing IRS tax examination and state litigation “could still jeopardize the financial stability and survival” of the organization, Levy wrote.
Even with all the stop payments Citizens’ Alliance has faced, the possible re-launched organization could qualify for future grants if funds are available, Riley said. However, based on the setup Levy has proposed, they may not be needed. With the organization hoping to be debt free when Levy finishes his tasks and with property rents being raised to market value, the nonprofit may make do without extra funding by selling properties to allow for the revitalization of others.
“Essentially continue to do what they already started to do,” Riley said.
Its real estate will continue to be the organization’s most important asset, Levy wrote. Citizens’ Alliance began purchasing and renovating the properties from the 1500 to 1900 block of East Passyunk Avenue at the beginning of the last decade, which rejuvenated the corridor to what it is now.
"The emergence of a thriving retail corridor with an increasing number of outdoor cafes attracted more residents, artists and young professionals to the row house blocks that intersect and surround the diagonal retail corridor,” Levy wrote noting this is also the opinion of two Center City developers, who reviewed the area pro bono. “Much of this is due to the spillover of demand from more expensive Center City neighborhoods to the north. But credit is due as well to the strategic investments of the Alliance.”
Contact Staff Writer Amanda Snyder at asnyder@southphillyreview.com or ext. 117.
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