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After appeal to Missouri governor, nonprofit settled $75,000 loan for just $9,459

After appeal to Missouri governor, nonprofit settled $75,000 loan for just $9,459

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Missouri Gov. Mike Parson

Missouri Governor Mike Parson goes over talking points on Friday, May 17, 2019, prior to a press conference coinciding with the final session of the Missouri legislature. Photo by Christian Gooden, cgooden@post-dispatch.com

Editor's note: After this article was published Friday, the auditor's office released more information regarding its review of the complaint.

JEFFERSON CITY — Downtown Sedalia boosters had tried to find a buyer for the historic Sedalia Trust building, but no one would bite.

It’s not that the building lacked curb appeal. Built in 1887, the limestone structure shoots up four stories and features a tower overlooking downtown. It’s a “prime example” of Romanesque/Chateauesque architecture in Missouri, according to the Friends of the Sedalia Trust.

The problem was whoever bought it would have to pour potentially millions of dollars into reopening the damaged building. Not to mention the $75,000 state historic preservation loan any buyer would have to pay back.

So in the summer of 2018, members of the Friends group attempted to raise the possibility of loan forgiveness with the state.

What happened next concerned at least one aide to Gov. Mike Parson and was the basis of a whistleblower complaint to State Auditor Nicole Galloway.

Ultimately, the state modified the loan this August, allowing the eventual buyer of the property to pay $9,459 to settle the $75,000 loan that had been issued from the state’s Historic Preservation Revolving Fund.

The State Historic Preservation Office, housed within Missouri’s Department of Natural Resources, first issued the loan in 2000 to the for-profit Sedalia/Pettis County Redevelopment Corp. after a fire in 1997 damaged the building’s roof. The group never made a payment and defaulted on the loan in 2006.

Meg Liston, secretary of the Friends group, the nonprofit that succeeded the redevelopment corporation, was pleased the group was able to “get something back to the state” after a 20-year effort to save the historic structure.

‘Where do we go?’

Sedalia Trust

Sedalia Trust building. Photo courtesy of the Missouri Department of Natural Resources

Liston said she attempted to address loan forgiveness with Mike Sutherland, then-deputy director of state parks, in late August or early September 2018 at a conference in Jefferson City.

But she said an introductory meeting between the Friends group and DNR officials ended soon after it started.

“We just didn’t get a hearing at all from Sutherland,” she said. “We expected to be able to go into a side room and be able to sit down and talk about it. And, you know, they didn’t give us the time.”

“From there,” she said, the group wondered, “where do we go? How do we get this in front of somebody that’s going to listen to it and figure out what we can do to move this building on and get something done?”

Enter Ron Ditzfeld. The Sedalia businessman sits on the board of the Friends group. Ditzfeld has donated $2,600 to Parson’s campaign since 2015. The most recent contribution was a $500 check in June 2018, weeks after Parson took office.

Ditzfeld sent a file of loan documents on Sept. 24, 2018, to Parson’s personal email account, according to records obtained by the Post-Dispatch through a Sunshine Law request. Ditzfeld did not return a request for comment.

Two days later, Jordan Duecker, an aide to Parson at the time, emailed Rich Germinder, the DNR’s legislative director. He asked Germinder whether there was a state law that allowed the loan to be “forgiven.”

Duecker also asked if there was a way for “this gentleman” to “navigate proper channels through DNR rather than reaching out directly to the Governor?”

Germinder sent a memo to Duecker and to Kayla Hahn, Parson’s policy director, on Oct. 10, 2018. He said the department had not found another instance of loan forgiveness.

Nothing in state law prevented modifying the loan, he said, but the state would have to weigh the public’s interest in any negotiation.

Liston said she wasn’t aware of anything to come out of Ditzfeld’s contact with the governor’s office. In early December, she said, the group again tried to jump-start negotiations.

This time, Barbara Hayden, another member of the Friends board, contacted the governor’s office, Liston said. Hayden and her husband Robert have donated $31,081 to Parson’s campaign fund since 2016, state records show. Barbara Hayden did not return a request for comment.

Sam Rourke, a governor’s office assistant, spoke to Hayden by phone on Dec. 10 and spoke to Liston on Dec. 11, according to an email from Liston to Rourke.

“I do appreciate any assistance Governor Parson might be able to extend,” Liston wrote.

“We got a call about a week later from DNR — and Sutherland at state parks,” Liston said. “Before that, we didn’t have anybody that was really going to be looking at it.”

According to emails, after a phone conversation with Germinder and Sutherland, Liston began a negotiation process by emailing state officials on Dec. 19 a request to reconsider the loan terms.

‘Preliminary research’

Galloway’s office confirmed it received a whistleblower complaint this year on Sept. 3; the office deemed it non-credible. The office initially declined to explain why.

"Based on the limited information provided via phone and no documentation, investigators determined there was not enough information to further investigate," Steph Deidrick, spokeswoman for Galloway, said Friday after this article was published.

In response to a Sunshine Law request, the office, citing attorney-client privilege, declined to release records related to its review of the complaint.

A former Parson aide told the Post-Dispatch administration officials had devoted several hours to researching and meeting about the loan in the fall of 2018. After working on the project, the aide learned that Ditzfeld was a Parson campaign donor, the aide said.

“The purpose of the loan was to rehabilitate and protect the property — it seemed to me that this was an abuse of the program and taxpayer dollars,” the former aide said. So the aide filed the complaint with Galloway’s office.

Galloway, a Democrat, is challenging Parson, a Republican, in next year’s gubernatorial race.

Kelli Jones, spokeswoman for Parson, said the administration conducted “preliminary research” into the loan. She rejected any suggestion of improper actions by the governor or his staff.

Jones said Parson and Ditzfeld communicated at no other point to discuss the loan and said Parson never discussed modifying the loan with his staff.

When told in an email that a source said Parson and two senior aides — Chief of Staff Aaron Willard and Policy Director Kayla Hahn — were involved in loan discussions, at least to some extent, Jones responded: “No briefing or meeting was held regarding this topic. Preliminary research was undertaken; however, it was determined that there was no reason for the Governor’s Office to be involved because DNR was already in the process of resolving this issue.”

A DNR spokeswoman said the agency had been in the process of resolving the issue since 2006, when the loan became due. (The Friends sent the official request to DNR to renegotiate in December, nearly three months after the campaign donor contacted Parson.)

Bill Bryan, who oversaw the historic preservation office as director of state parks, said he could not recall involvement from the governor’s office in historic preservation loans when he worked under former Gov. Jay Nixon, a Democrat.

“I don’t remember there being that kind of interest in those,” he said.

A second former state official said the involvement seemed unusual.

Steve Mahfood, who signed off on the $75,000 loan as director of DNR in 2000, said he was worried other borrowers would attempt to renegotiate their state loans because of this borrower’s success.

“It’s not normal to outright forgive these,” he said. “And a reduced payment is unusual.”

A representative with the Department of Natural Resources said the deal allowed the state to help save the building as well as recoup some of what it was owed.

“The purpose of the State Historic Preservation loan program is to save historic structures and return them to productive use as effectively as possible,” said Connie Patterson, DNR spokeswoman. “This was a legacy loan that was issued many years ago, and we handle each loan on a case-by-case basis.”

Bill Hart, executive director of the Missouri Alliance for Historic Preservation, a nonprofit, said the Sedalia Trust stands on a prominent block in Sedalia’s downtown. He looked forward to the building generating tax revenue once a new owner completes renovations.

“It was probably a grand exception to the rule rather than the rule,” Hart said of the state’s agreement with the Sedalia group. “The businesses that are in there — they’ll pay sales taxes, they’ll pay employment taxes. All of that is a benefit to the city. A building that’s gone yields no potential.”

State makes a deal

Liston said that in addition to the $75,000 state loan, the city of Sedalia had spent $495,000 on the property.

“It really would not have lasted two more winters,” Liston said, recalling when the Friends group intervened in 2014. “The bricks were falling out of the north wall.”

CSC Property Holdings LLC announced in July its purchase of the building for $100,000.

The sales proceeds went to settle the Friends’ debts with the city and the state: Sedalia got $85,134, while the state got $9,459. The remaining $5,406 went toward marketing costs, according to documents obtained through an open-records request.

Brian Smith, the new owner, told the Sedalia Democrat in July his company plans to use the building’s fourth floor for office space and rent out the second and third floors. He said the first floor might be retail.

Liston said the deal was the “best we could get.” She said it will take a significant investment by CSC to open the building.

New heating, plumbing, windows, electric, insulation and other necessary fixes are estimated to cost $2.5 million, which factored into the sale price, she said.

“There’s nothing left inside the building other than an old safe.”

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