The Tennessee Multicultural Chamber of Commerce purchased five parcels of land on East M.L. King Boulevard through loans and federal grants to build a business center that never materialized, records show.
The Chamber paid $700,000 for the properties, with more than two-thirds of the money coming from a grant through the Chattanooga Community Development Foundation Institution Inc., a nonprofit organization set up to make loans to small businesses in urban neighborhoods.
"The loan was made to purchase two lots along M.L. King Boulevard on which to later construct [Multicultural Chamber] offices and a Business Solutions Center," David Johnson, president of Chattanooga Neighborhood Enterprises and the listed principal of the foundation, wrote in an email. "The building was supposed to be constructed with a subsequent grant."
The mission of the Chamber is to help minority-owned and small businesses to get a leg up against larger businesses. Multicultural Chamber Executive Director Sherrie Gilchrist and Chamber board member John Taylor could not be reached for comment.
The Community Development Foundation Institution loaned $579,169 to the Multicultural Chamber in 2008 for the acquisitions, a city review states. The review, by City Auditor Stan Sewell, says $500,000 was paid for the two parcels, whose total assessed value was $211,000. It is unclear how the rest of the $79,169 was spent.
Johnson said Wednesday the development corporation approved the loan in September 2008. He said he was not sure why the board made the decision, but property along M.L. King Boulevard could be worth more.
"A local real estate professional has indicated that property along MLK often sells in excess of assessed value," he said.
Johnson did not say why the loan was made for almost $80,000 more than the purchase price.
Hamilton County Assessor of Property records show the Chamber also spent $200,000 from U.S. Department of Housing and Urban Development to buy three other parcels of land on M.L. King Boulevard during the height of the housing boom.
The Tennessee Multicultural Chamber has drawn some fire after Sewell gave City Council members a copy of his review, which highlighted concerns about financial mismanagement, extravagant salaries and travel expenses for Chamber employees and inappropriate expenditures on two of the M.L. King Boulevard properties.
The review also questions how $540,000 in federal HUD money was spent. About $200,000 was spent on purchasing land for the Business Solutions Center, while $106,000 was spent on planning, administration and project management, but there are no details of how the rest of the more than $200,000 was spent.
A spokesman for HUD in Washington, D.C., said that, in most matters dealing with questionable activity with HUD money, the department would send an auditor to review records.
An Atlanta-based HUD spokesman said the department would review Sewell's report and have further comment today.
On Tuesday night, Chamber board members asked the City Council for a $75,000 budget allocation, but the council refused. Council members asked the Chamber to provide an audit and answers to 18 questions raised in Sewell's review by next Tuesday.
Chamber directors also said Tuesday night they might make an appearance at the Hamilton County Commission meeting this morning and ask for the same amount of money.
Some commissioners said Wednesday they want the same questions answered before they agree to give any money to the Chamber.
"I don't think there's anything they can say," Commissioner Joe Graham said. "The need is there, but where is the proof? Where's the proof in what they are doing?"
Commissioner Greg Beck said there is no doubt the commission wants answers.
"I think that would be universal," he said. "The same questions the city wants, we would want them to answer."
He said somehow the governmental bodies need to "keep the program alive."
Richard Beeland, spokesman for Mayor Ron Littlefield, said the mayor met with Gilchrist and Taylor Wednesday afternoon.
"There are still a lot of unanswered questions," he said.