By Gordon Hopkins
In 2004, Steve Foutch, until recently the owner of Fairbury 23 Apartments, was loaned $202,000 by the City of Fairbury to convert a former school building into low-income housing. The city is now asking for repayment of that loan, despite Foutch’s claim that he believed the loan would be forgiven.
In 2003, the city was given two grants; $130,000 was money from the Cranston-Gonzalez National Affordable Housing Act of 1990 (HOME program) and $72,000 was CDBG (Community Development Block Grant Programs) money. Both of these were grants given to the city for the express purpose of creating affordable housing. According to Fairbury Mayor Spencer Brown, the money was then given to Mr. Foutch in 2004, not as a grant but as a loan.
Foutch spoke at a meeting of the Fairbury City Council the evening of Tuesday, June 6, 2023. He indicated that the agreement to make the loan forgivable was made with Ralph Knobel, who passed away in 2018. Foutch also acknowledged that agreement was not in writing, “Ralph Knobel put the whole project together. A large firm in Kansas City was the original developer, could not get into work. And so they brought us up ability to do some of these projects when other people can’t. So we had a new strategy and new structure to put that deal in place. And the various entities that loan money to the project to fill the gap. All those loans are actually forgivable loans. But you can’t state that in the paperwork or else it doesn’t pass the sniff test through the CPAs and the law firms and so forth.”
City Council member Bradley Kuzelka said, “I know what he’s saying is the way it happened. I remember. I’ve been here long enough in this town. This is the way it happened. So it’s unfortunate that we have nothing in writing, you know what I’m saying? That’s that’s the hard part.”
Foutch said, “But the other loans that were made to the project, from 23 Preservation Foundation, from the Federal Home Loan Bank in Topeka, and so forth, those have already been forgiven. So we’re here tonight, I guess we need council approval to also go ahead and forgive the city loans.”
Foutch noted, “So, the alumni Preservation Foundation loaned me a half million dollars. They’ve forgiven it.”
Mayor Brown said, “So, this was proposed to me as a loan. And I guess in my terms, loans always need to be paid back, whether this was a grant that was issued to the city and then we issued it as a loan. I feel like this one needs to be repaid, as is any loan that anybody takes, and we need to take those development dollars, those those CDBG funds, and we need to reinvest them back into something else. I don’t think just forgiving the liens, it doesn’t really do us any good in the community.”
“There are six loans. All six loans are written exactly the same,” said Foutch. “And all five of the other entities forgave the loans.
Foutch said, “The city is the only group that has not technically forgiven the loans.”
The mayor said that, if the loan was forgiven, “It’s not going to benefit Fairbury.”
Foutch responded, “Well, it did by saving the building.”
Foutch indicated that if he had known the city would not forgive the loan, “I never would have done the project. There’s no way.”
“And I was guaranteeing the project for 18 years for $3.7 million. If it tanked, I had to pay everybody back. $3.7 million, said Foutch. “HUD money, block grant money, all that stuff is forgivable money.”
Foutch said the grant money could not be given directly to him, “We had to use you as an intermediary, right to get the money.”
“I get that,” the mayor said. “It still doesn’t change the fact that, you know, it was our grant money to loan, you.”
City Council member Doug Brown said, “I understand totally where Spencer’s coming from. But I also understand that we would have incurred the cost of tearing the building down.”
Kuzelka made a motion to forgive the loan but the motion died for a lack of a second.
After the meeting, FJN reached out to Mayor Brown and asked about the use of the money should the loan repaid and if it had to be used expressly for low-income housing, since that is what the grants were originally authorized for. The mayor responded, “The requirements have already been satisfied. It can be used for something else.”
FJN also asked Foutch for comment. He has not responded as of press time.