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March 1, 2014

State to audit failed health center

Site got $2.3M grant, closed in four years

By Joe Mahoney Staff Writer
The Daily Star

---- — Four years after state officials announced in a chirpy press release that a $2.3 million economic development grant was being awarded to build the Maranatha Family Center in Schoharie County, the fitness and health facility closed after it failed to generate enough business to sustain itself.

That was last September. Today, the 85,000-square-foot building building today stands in Richmondville as an example of a project that raised hopes and expectations but in the end consumed significant taxpayer dollars that officials now admit will never be fully recovered.

On Friday, a spokesman for the state Comptroller’s Office in Albany confirmed the agency is conducting an audit related to the administration of the grant funds that flowed through the town government to the limited liability corporation behind Maranatha. The audit is expected to be completed later this year, said Brian Butry, a spokesman for Comptroller Thomas DiNapoli.

Meanwhile, the state Business Development Corp. is seeking to recover $1.85 million through a foreclosure action initiated in December against the developer, Stella McKenna.

Finding a buyer for the property may take many months if not longer, said Marvin Parshall Jr., the Richmondville town attorney.

“It’s a slow-going process to get to the foreclosure proceeding,” Parshall said.

Among the factors complicating the property’s status: five banks were involved in the loan structure for Maranatha and the business had obtained a tax break in the form of a payment in lieu of taxes (PILOT) arrangement. McKenna’s corporation had also received a $650,000 grant. In addition, the Schoharie County Industrial Development Agency had loaned the business $35,000.

Assemblyman Pete Lopez, R-Schoharie, said the closing of Maranatha has left members of the local community “saddened and frustrated.”

“Certainly,” he said, “we hate to see a business fail, and we hate to see a resource lost to the community.”

Government grants intended to spur economic development, he noted, always carry a degree of risk. And while Maranatha and some other projects are examples of how good intentions never led to the expected results, there are many examples of companies using such grants as springboards to success, he said.

Advocates for Maranatha, whose ranks in 2009 included then-County Economic Developer Jody Zakrevsky, had high hopes for the health club, predicting it had the potential to create dozens of jobs.

The health center that was built includes gyms, fitness rooms and rooms for classes and conferences.

The application for state funding included upbeat language about the chances of the business succeeding, stating “local orthopedists, physical therapists, counselors, and fitness instructors have expressed interest in leasing the available tenant space of 7,500 square-feet.” 

Robert Nied, a local resident who is also the director of the Center for Sustainable Rural Communities, said the collapse of Maranatha raises serious questions.”There was no accounting and no oversight of that project from the beginning,” he said. “There never was a viable business plan. The taxpayers deserve an accounting of how that money was spent.”

One goal of the project, according to the application for state funding, was to restore a historic Dutch barn on the property. But instead of being restored, the barn ended up being demolished during the construction of the facility, Nied said. The reason given for dismantling the barn, he recalled, was that it was damaged during the construction project.

Local officials said rumors have surfaced that a pharmaceutical firm with ties in the region might be interested in acquiring the facility and its 23 acres of surrounding land. But it is expected that the foreclosure action would have to be resolved first, officials said.

Parshall said he’d like to see the State University at Cobleskill acquire the property, which sits about a mile from its campus. That would be one way for the state to recoup some of the losses it sustained from making a bet on a business model that didn’t work, he said.

However, a spokeswoman for the college said she has seen no indication that college officials are interested in acquiring Maranatha.