A $256,400 Forgiven Loan for a $40,000 Property Purchase

by Don Moniak

May 10, 2023
Updated May 11, 2023 (2)

Aiken City Council’s real estate transactions record– past and present– were a factor in Monday night’s (May 8, 2023) Council meeting. One issue, involving forgiveness of a $256,400 loan in exchange for a $40,000 property purchase threatened to bob to the surface, until it was quickly quashed, leaving many in the audience wondering about details.

The loan forgiveness pertained to the City of Aiken rescinding a $256,400 loan balance (1) held by the nonprofit, quasi-governmental Aiken Corporation (Aiken Corp) in early 2020. In return, Aiken Corp purchased a $40,000 property essential to connecting the new Steeplechase venue to city limits; thus facilitating its eventual annexation into the city.

The issue arose during a contentious discussion regarding an ordinance to grant an 0.25 acre driveway easement through the city’s property north of its airport to a 16-acre property soon to Bear Mountain, LLC(2). The easement will cost $1.

In the midst of comments regarding the merits of the $1 easement, Aiken resident Luis Rinaldini cited another property transaction:

“The city went out of its way to buy a parcel for forty thousand dollars at the intersection of Park Avenue and Richland that is totally unusable, in the middle of traffic, just so it could annex the Steeplechase because that would make the Steeplechase contiguous. Sometimes you have to do that when you’re doing real estate, perfectly logical perfectly sensible. But the owner of that parcel didn’t give it to you for free. But the owner of that parcel didn’t give it to you for free.” (1:07:00 of meeting video)

After the comment period, City Manager Stuart Bedenbaugh stated:

“I would like to say that the city did not buy that parcel. That is not correct.” (1:11:24 of meeting)

Mr. Rinaldini returned to the podium to state:

“Shortly before that the city forgave a $250,000 loan,” before being cut off by Presiding Officer Mayor Osbon for attempting to comment a second time on the $1 easement issue.

Mr. Rinaldini then asked “Do you want to suppress this information?” and Mayor Osbon replied : “Yes, you have already spoken on this issue.” A half-minute discussion ensued regarding the semantics of the purchase.

Who Bought The Property?

The property in question is a 0.4 acre parcel at the southeast corner of East Richland Avenue and Park Avenue, across from the new Steeplechase venue. (Figure 1).

The property was purchased by Aiken Corp’s property management and purchasing arm, LED of Aiken, Inc, on February 20, 2020. Prior to the $40,000 purchase, the following events occurred:

December 9, 2019: Aiken City Council held the First Reading of an Ordinance (3) to “provide certain incentives to Aiken Steeplechase Association, Inc. to Encourage Tourism and Economic Development Benefitting the City.” The vote to approve was unanimous.

The proposed incentives (4) were a $1.0 million grant and a $0.5 million loan to assist the Aiken Steeplechase Assocation with a $2.12 million purchase of 140 acres.

The ordinance required annexation of the Steeplechase property once it became adjacent to city limits. According to the meeting minutes, a short discussion took place regarding annexation, in which Councilman Ed Woltz asked about the 0.4 acre property:

“(Councilman Woltz) thought the acquisition of the triangle piece of property to make the property proposed to be acquired by the Steeplechase Association a part of the city was part of the deal. Mr. Bedenbaugh stated that acquisition is being done through a third party realtor. He said he thought an offer was in the process of being made.”

January 8, 2020. A meeting of the Aiken Corporation’s Executive Committee was held.(5)

According to the meeting minutes a commitment was made by City Manager Bedenbaugh to forgive a $256,400 loan to Aiken Corporation if it bought the 0.4 acre property to facilitate the annexation (Figure 2) of Steeplechase:

“Chairman Buzz Rich asked City Manager Stuart Bedenbaugh to present the idea of the City of Aiken regarding the Steeplechase property. Mr. Bedenbaugh stated the City would like for the Aiken Corporation to purchase a small piece of property and annex it into the City limits to allow the Steeplechase property to be contiguous to the City limits. In so doing, the City of Aiken will forgive the Aiken Corporation’s loan of $256,400..”

January 13, 2020. City Council unanimously approved the Steeplechase incentive during the Second Reading of the ordinance (6) but not before amending conditions by removing the loan, but still granting $1.0 million. (7)

February 10, 2020. The First Reading of an Ordinance to “rescind the balance of the Aiken Corporation Consolidated Loan with the City of Aiken” was approved unanimously. (8) The ordinance reads, in part:

“WHEREAS, Aiken Corporation has recently purchased land associated with the recent purchase of land by the Aiken Steeplechase Association, Inc. and is now asking the City of Aiken to rescind the principal amount of this loan so that the loan will be considered paid in full; and…”.

February 20, 2020. Aiken Corporation closed on the 0.4 acre property for $40,000.

February 24, 2020. City Council unanimously approved rescinding the Aiken Corporation loan balance during the Second and final Reading of the ordinance.

April 21, 2021. City Council unanimously approved the annexation of the Steeplechase property.

That is how the Aiken Corporation spent $40,000 to have its $256,400 loan balance forgiven by the City of Aiken. Technically, it is correct that Aiken Corporation bought the property and still owns it. But functionally, the City of Aiken funded the purchase with a substantial incentive. It was not the first decision that was predetermined at an Aiken Corporation meeting and then approved by Council.

Footnotes:

(1) The Aiken Corporation can be described as a quasi-governmental non profit, charitable organization whose primary donor is the City of Aiken. Donations are made via grants, land transfers, and interest-free loans.
Aiken Corp also generates revenue by leasing the Newberry Street office buildings that it leases from the city under a 99-year ground lease.

Ordinances authorizing city property conveyances and interest-free loans housing development to Aiken Corporation occurred from 2003 to 2009. The actual amounts of the loans, compared to the amounts authorized, was not reported in any ordinances. The loans and associated property transfers include:

On May 9, 2005, and ordinance was passed transferring ten city-owned properties in the Toole Hill neighborhood to Aiken Corporation for $5 as part of the City of Aiken Northside Revitalization and Housing Program. Similar $5 conveyances occurred on McCormick and Morgan Streets over the next several years.

(The city later valued these lots at $10,000 each in ordinances authorizing sales to the Community Development and Improvement Corporation—a nonprofit subsidiary of the Aiken Housing Authority—and to any interested parties in 2008. )

On November 14, 2005, an ordinance was passed allowing the city to borrow $870,00 from a special General Fund holding account to fund new home construction in North Aiken. The ordinance stated that no interest would be charged on $170,000 being loaned to Aiken Corp.

On January 6, 2006, an ordinance was passed authorizing an interest-free loan up to $250,000 to Aiken Corp; of which $170,000 was deemed immediately eligible for new home construction in the Toole Hill, Edgewood, and Crosland Park neighborhoods.

On February 23, 2009, an ordinance was passed authorizing an interest-free loan up to $250,000 to Aiken Corporation, of which $170,000 was deemed immediately eligible for new home construction in the Toole Hill, Edgewood, and Crosland Park neighborhoods.

On the same day, an ordinance was passed authorizing that a $67,500 interest-free loan originally made in 2003 to assist with redevelopment in the Chesterfield Street corridor be used instead for Toole Hill, Edgewood, and Crosland Park neighborhoods.

On August 8, 2011, an ordinance was passed consolidating three loans, for Northside housing development and painting the Willow Road/Beaufort Street “Spec Building,” into a single $328,800 loan.

On September 22, 2014, an ordinance was passed forgiving $72,000 of the loan, and reducing it to $256,400.

(2) Updated for clarity, 5/11/23

There is no Bear Mountain, LLC registered with the SC Secretary of State’s office. There is a Bear Mountain Real Estate, LLC incorporated on March 7, 2023 and whose agent is Ray Massey of 210 Colony Parkway in Aiken. Bear Mountain, LLC is listed on both the ordinance legislating the ordinance, and the deed granting the ordinance. (below)

(3) The ordinance information can be found beginning at Page 306 in the December 9, 2019 agenda, as well as in the January 13, 2020 agenda packet—which also contains the meeting minutes from December 9th. The final ordinance is here.

(4) The first incentive package consisted of;

a. A $1 million grant,  consisting of  $0.5 million was from the one-percent Capital Project Sales Tax (CPST) and $0.5 million was from the city’s Accommodations Tax.  The CPST money was allocated to “green space.” 

b. A $0.5 million, 20-year loan at 2.78 percent interest. The source of the funds was $0.3 million from the Accomodations Tax and $0.2 million from the city’s one-percent Hospitality Tax. 

(5) Listed as present as ex-officio voting members were City Council members Lessie Price and Gail Diggs.

(6) The ordinance information can be found begining at Page 205 in the February 10, 2020 agenda packet. The supporting memorandum can be seen below. The February 24, 2020 agenda packet had the same information. The final signed ordinance is here.

(7)The source of the $1.0 million grant was changed to $0.5 million from CPST dedicated to green space, $0.3 million from accommodations taxes, and $0.2 million from hospitality taxes.

The $216,400 difference between the loan forgiveness and the property purchase was never added to the cost of the $1 million Steeplechase incentive.

(8) According to the 2/10/20 meeting minutes, the only discussion prior to the vote was as follows:

“Mayor Osbon stated he had asked City Attorney Gary Smith to explain why members who serve both on City Council and Aiken Corporation do not have to recuse themselves.

Mr. Smith stated there are specific provisions in the State Ethics Act that allow members of Council to also serve on the Aiken Corporation Board and doing so does not create a conflict of interest and prevent Council from doing their City Council business.”

Mr. Smith did not cite the provision. The SC Ethics Commission did rule, in 2000, that elected officials who serve on the Boards of organizations created by, and serving at the pleasure of, the body to which the elected official belongs are exempt from conflict of interest provision in state ethics law.