A court-ordered auction will sell off a trio of prime downtown Chattanooga properties, which the defunct Tennessee Multicultural Chamber of Commerce acquired in 2008 under questionable circumstances.
Combined with several other bad loans, the unpaid debt from the Multicultural Chamber has forced the Chattanooga Community Development Financial Institution to stop making new loans and try instead to recover hundreds of thousands of dollars from organizations that no longer exist.
"Given the level of default that the CCDFI has encountered, it has not generated any new cash flow and is not making new loans," said board member Ric Ebersole.
The M.L. King Boulevard properties together are assessed at just under $80,000 by the Hamilton County Assessor's Office and will be sold April 10 at 11 a.m. at the west door of the Hamilton County Courthouse. The CCDFI needs to sell them for about $90,000 to be made whole on its debt, Ebersole said.
The Multicultural Chamber, which planned to build a headquarters and business center on the East M.L. King site, spent more than $300,000 in federal funds acquiring land and creating plans before turning to a local nonprofit for an additional $579,000 to purchase two more nearby properties.
The properties along the 400 block of M.L. King were not completely contiguous, and it remains unclear how the Multicultural Chamber planned to proceed with its downtown development, which is adjacent to several apartment complexes used by UTC for student housing.
Both the plans and the Multicultural Chamber itself fell apart amid audits and investigations into extravagant salaries, questionable financial decisions and possible misappropriation of funds.
After a Chattanooga Times Free Press investigation and a city audit uncovered $238,400 in missing money, the Multicultural Chamber's board president, John Taylor, said "the money is where the money is," declining to elaborate.
Led by then-executive director Sherrie Gilchrist, the Multicultural Chamber paid hundreds of thousands of dollars more than the M.L. King properties were worth, booked tens of thousands of dollars in taxpayer-supported travel expenses, and failed to answer questions regarding the group's finances during a city audit.
The CCDFI, managed by Chattanooga Neighborhood Enterprise, then foreclosed on its $579,000 loan and sued the Multicultural Chamber to obtain its three remaining properties to make up the difference between the size of the loan and the properties' value.
"To me, this is a positive step," said Ebersole. "We've gone from having a questionable asset on paper, to one that if we get past this, it cleans up the balance sheet a little bit."
As CNE's interim executive director, Ebersole has worked to recover the bad loans made by the CCDFI, which formerly counted both Gilchrist and ex-CNE chief David Johnson among its board members.
Johnson, prior to resigning amid a flurry of accusations from former employees about sexual and financial misconduct, acknowledged that the organization conducted no appraisal on the properties. However, he also claimed the CCDFI had made all of its payments and was on sound footing.
At present, the CCDFI is simply holding the original two lots, in hopes that they increase in value as the real estate market recovers, Ebersole said. If the three lots going up for sale on April 10 do not generate enough interest to make up for the bad debt, those two will be held in hopes of a revival on M.L. King, he said.