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June 10. 2013 8:57PM

Restaurant loan brings Manchester Development Corporation policies under review

MANCHESTER — The Manchester Development Corporation is required to get approval from the aldermen for any new loans it issues, contrary to the statements of one of its leaders last week.

The MDC furnished a copy of its bylaws and history to the Office of the City Clerk Monday, in response to concerns raised during the debate last week over a $35,100 loan to a downtown restaurant. The MDC board had approved the loan, as did the aldermen after a tense debate.

Critics of the deal said it amounted to a “bailout” of a struggling restaurant and was inconsistent with the mission of the MDC, which has primarily funded real estate redevelopment projects.

During the debate, MDC vice-chairman Sean Owen defended the loan to XO on Elm, arguing it was carefully vetted, and he stated that such loans were brought before the aldermen only “as a courtesy.”

The bylaws, as first reported by the New Hampshire Union Leader on Sunday, state that “the making of any loans” by the MDC must have the “prior approval” of the aldermen. The aldermen must also approve the organization’s budgets, the disposition of its assets, and other matters, according to the bylaws, which were last revised in 2002.

The documents provided Monday by the MDC also confirm that its original funds came from the sale of city-owned land at the airport to a manufacturing company.

In 1985, “Mayor Robert Shaw proposed using this $1 million as the basis for a new approach to Manchester’s economic development program that would eliminate some existing overlap and provide more flexibility,” according to a history provided by the MDC.

The Greater Manchester Development Corporation, as it was originally known, first had its own staff. It later relied on the staff of the Manchester Economic Development Office.

This office was dissolved earlier this year and shifted over to the mayor’s office.

The latest controversy arose when the aldermen were asked to approve the loan for XO last week, with one letter from the MDC provided as documentation. Titled “MDC Revolving Loan Approval,” it states the approval is based on “a thorough review” from an underwriting organization and the borrower’s “positive payment history.”

The letter was signed by Samantha Piatt, the mayor’s chief of staff, on behalf of the chair of the MDC’s investment committee, Joe Wichert.

An internal string of e-mails among MDC board members obtained by the Union Leader indicated that the underwriter considered the request a “risk” and the restaurant in a “precarious situation.”The two aldermanic representatives on the MDC weren’t copied in these communications. Alderman-At-Large Dan O’Neil, who requested the documentation concerning the MDC’s bylaws and history, said he wants there to be a more thorough process for approving MDC loans in the future, “so this does not happen again.”

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