Negotiations have fallen flat regarding funding for the relocation of the 29-year-old Romiad building, and the two-story building will now most likely be torn down as soon as next week.
Talks between the Petersburg Economic Development Council (PEDC) and local business-owner Pete Litsheim, who had asked for a loan of $210,000 to move the building from its current location near the corner of 2nd and Haugen to an empty lot next to Scandia House on N. Nordic Drive, have stalled do to a disagreement over collateral and other contractual obligations.
Last winter Litsheim responded to the Petersburg City Council’s plea to save the building from being destroyed by offering to move it to a lot that he owns. The building needs to be removed from its current location this spring to make way for the construction of the new Petersburg Library.
The City Council twice approved the short-term loan at a rate of 5 percent interest, using Litsheim's business, Diamante` Gift Shoppe, also on N. Nordic, and a rental property as collateral for the loan.
The PEDC drafted the loan contract and handled the details. “We've never done something like this. So, we figured to make a legal binding document we went to someone who handles these contracts all the time,” said PEDC Coordinator Liz Cabrera.
The PEDC hired Margaret O’Neal, Director of Operations, Director of Southeast Alaska Revolving Loan Fund from the Juneau Economic Development Council to detail the paperwork and the terms of the loan.
When Litsheim met with O’Neal and the PEDC on Friday, they were not able to come to a mutually agreeable arrangement, Litsheim said.
“I feel like I've been getting railroaded the whole time,” Litsheim said regarding Fridays meeting.
According to Litsheim, he met all of O’Neal's and the PEDC's requirements, but then more requirements were added to the contract.
The council voted on Feb. 21 to unanimously approve a loan. Then again on Thursday, March 8, the City Council met to discuss details of the loan agreement, and voted a second time to approve.
“I trusted what Mrs. Cabrera had said to me, that the property was adequate,” said Councilman Don Koenigs during the March 8 meeting.
“Where the PDEC comes in, and the Juneau Economic Development Council comes in, asking for more collateral, if that's recommended that's now before the council. I'm comfortable personally with what was provided by Mr. Litsheim. Because I feel once the building is moved and put on the property … that the building itself, and the property, that's all collateral.
“This is a short-term loan, one year,” Koenigs said. “It would be my goal, my hopes that the council could come to some sort of agreement with Mr. Litsheim,” he added.
Providing clarification regarding the terms of the loan, Cabrera told the council that it wasn't PDEC or the JEDC that had asked for more collateral, but the city that made the request.
Problems arose when Litsheim was asked for personal credit information, articles of incorporation, and personal guarantees from him and his wife and in-laws, who are all partners in Diamante`.
“We've had our businesses in town, we've raised our family here … We don't have an integrity problem,” Litsheim said. “Now our private information is out there. … The committee is shoving down our throat what they think we should do.”
“The council recommended that some things be done and Diamante` doesn't want to do them,” Cabrera said in s phone interview. “I don't know what will happen after this,” she added.
“As an independent organization, the PEDC has the responsibility for protecting what is to a certain extent public money. This means it is prudent for them to follow safe lending practices, which include such requirements as consistent articles of incorporation, and corporate bylaws from those entities where they are considering loaning money,” said City Manager Steve Giesbrecht.
“In the Romiad process, the PEDC’s board felt that it was very important to make sure that any loan agreement be backed up by the appropriate documentation. Unfortunately the proposed agreement between PEDC and Diamante’s Gift Shop was unable to be finalized within the time frame available,” he said
“While I believe everyone acted in good faith … In the end, it all was too much to get done in the limited amount of time available prior to when the Library construction period was estimated to begin,” Giesbrecht added.
“It's a crying shame, it's an absolute waste to have to tear it down,” said Richard Burrell of Rock-N-Road Construction.
The building will most likely be torn down early next week. The remains of the building will be hauled away, Burrell said.
Rock-N-Road had been under contract with the city to remove the building from its current location, but the City had not specified how that should be done.