The University Park Alliance, a nonprofit that set out a dozen years ago to change the looks and life of struggling neighborhoods around the University of Akron, was facing mounting challenges in its work on 33 properties before a local financial institution placed an administrative hold on nearly $400,000 in cash and a certificate of deposit in early September.

The University Park Alliance, a nonprofit that set out a dozen years ago to change the looks and life of struggling neighborhoods around the University of Akron, was facing mounting challenges in its work on 33 properties before a local financial institution placed an administrative hold on nearly $400,000 in cash and a certificate of deposit in early September.

The hold was placed by Valley Savings Bank because UPA had not made payments on mortgages and notes. Records also show that UPA had become delinquent on nearly $39,000 in property taxes that were due in July for all but nine of the 66 properties it owns.

After UPA appealed to the court for a release of its funds so that it could address the spiraling decline, Valley responded by saying that the alliance “has done little or none of the work improving the properties that it represented to Valley (and many others) that it intended to do.’’

Court documents filed in recent weeks reveal the challenge leaders of the nonprofit neighborhood economic development group face as they discuss a leadership void and their ability to move forward.

UPA, created by city leaders in 2001, lost its executive director in April when Eric Anthony Johnson resigned. It is currently operating with just one employee, a secretary.

The group, which has a board of directors made up of 15 prominent city organizations and businesses, is headed by chairman David James, superintendent of Akron Public Schools.

Account totals

Although UPA’s account at Valley Savings in Cuyahoga Falls totaled $391,000, records show the group had liabilities of $640,500 in a credit line, 30-year mortgage and five-year note on the 33 properties spread out along Excelsior Avenue and Arch, Perkins and Adolph streets.

The organization has no cash flow after a $6 million grant and $1.8 million loan from the John S. and James L. Knight Foundation were canceled during the summer. The loan was never used, and UPA board members have blamed the cancellation of the grant on Johnson, saying he overpromised or was overconfident in the planning and execution of development projects.

Johnson has previously said he believed that his plans had the support of the board and the Knight Foundation.

The money on hold at Valley is part of $500,000 granted by the Knight Foundation for operations after the $6 million was terminated.

Financial documents show that Valley issued credit in 2012 to UPA for approximately $99,400 that had a maturity date of Aug. 10 and went into default as unpaid in September.

Also, UPA had two other loans from Valley. In 2012, it secured a 30-year mortgage on some 13 rental properties on Excelsior and Roselawn avenues, on which it owed $135,200.

A five-year balloon loan obtained in February carried a balance of $407,400 and was secured by about 20 properties near City Hospital.

Court documents also show that a certificate of deposit for $20,000 was used as collateral.

The bank says the loans went into default when property taxes were not paid.

In a September meeting, UPA lawyers demanded release of the organization’s funds, saying without them, it would “suffer irreparable harm.”

UPA said it needed the money to clear up issues involving unsecured debt of approximately $1.3 million, security patrols and various consultants, studies and professional services.

Valley Savings responded that it faced the prospect of foreclosing on 33 properties, using the revenue to pay taxes, or hiring a Realtor to sell the properties or manage them.

Summit County Common Pleas Judge Jane Davis last week denied UPA’s motion to unfreeze the funds.

Officials with both UPA and Valley declined to talk about the case, saying they cannot discuss pending litigation.

No movement

“Nothing is moving forward,’’ James said in an interview. ‘‘There might be the potential, but I don’t see it happening anytime soon with the current financial situation of UPA.

“The one thing we may look at is the potential of divesting ourselves of the property we own and letting someone else develop it,’’ he said. ‘‘All of the court cases are going to delay any work on any of this stuff as we try to work through settling with the creditors.”

In addition to creditors involved in lawsuits, there are others awaiting payments, and it’s possible more suits will be filed, James said. Meanwhile, the board is attempting to negotiate outside of court.

James did not have the exact number of properties tied up in the Valley Savings suit, but said he believed Valley will most likely “own those properties and have to deal with them because they’re collateral on a loan.”

As to other properties, “We will probably need to divest ourselves if we don’t come up with the money that’s owed that Valley wants.”

Even with the sales, that probably won't solve the financial problems, James said.

“UPA isn’t holding several million dollars of real estate value out there,” he said.

Summit County Fiscal Office research shows the properties are held under the names of various entities, including University Park Development Corp., UPA, Penny Lane Properties LLC and Legacy Perkins III LLC.

Separately, following a Sept. 24 board meeting, UPA asked its 15 member organizations for $1,500 apiece to help cover expenses for the rest of this year.

Contacted by the Beacon Journal, University of Akron President Luis Proenza, Akron Mayor Don Plusquellic and Akron Metropolitan Housing Authority Executive Director Tony O’Leary all said their entities would pay the fee.

James said he would take the request to the Akron Board of Education, but was unsure whether the board could approve the payment.

Jason Dodson, spokesman for Summit County Executive Russ Pry, said the county had no comment.

The board also includes CEOs and heads of major companies, government entities and institutions including the Greater Akron Chamber, the Akron Beacon Journal and the city’s three hospitals.

Reorganization question

James said UPA faces difficult reorganization questions.

“If the organization dissolves … there are probably creditors that would not be fully paid. To keep the organization, we would need a huge infusion of money to pay the creditors and start a clean slate. Answer this: Who’s going to pay all this money to pay for work that hasn’t been done?” said James.

James said that if a new group were to take UPA's place, there is a risk that creditors would seek to be paid by the successor organization.

“It’s as much of a public relations issue as well as a legal issue,” said James. “Everyone around the table can agree on this: We would like to see the mission and vision of UPA continue. It’s just, how is that going to happen?”

James said the best scenario is probably to try to settle with creditors and then return to the Knight Foundation, which has invited UPA to re-apply for a grant.

Jennifer Thomas, Knight Foundation Akron program director said, “This summer, UPA requested and Knight Foundation provided UPA with $500,000 to meet existing obligations and work out its future plans.

If and when Knight receives a proposal in the future from UPA, we will evaluate all aspects of the request, including mission fit and budget. Knight Foundation remains deeply committed to Akron, where it was founded.”

Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Follow her on Twitter at www.twitter.com/blinfisher and see all her stories at www.ohio.com/betty

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