What if the Debtor Thinks its Too Big to Pay?

Say you’re a city. (What city would you be? You should email editor@insideARM.com. I’d like to be Amsterdam, because I love a good canal.) And say you’re a city with a $22 million dollar debt on your books?

As it turns out, there are no easy answers to how to go about collecting that debt, as the city of Rochester, New York, is discovering. Here’s a breakdown of what they’re dealing with:

Debtor

RochWil (Sibley Building): $22 million

The Numbers

City float loan
Original principal: $1.5 million.
Term: 72 months.
Months delinquent: 108.
Total amount delinquent (including interest and late fees): $1.9 million.

Section 108 loan (federal loan to the city, reloaned to RochWil)
Original principal: $4 million.
Term: 60 months.
Months delinquent: 130.
Total amount delinquent (including interest and late fees): $6.6 million.

PILOT (payments in lieu of taxes)
Original principal: $6 million.
Term: Not available.
Months delinquent: 185 months (for oldest payment).
Total amount delinquent (including interest and late fees): $13.7 million.

The article — which is worth a read — goes into detail about how Rochester might have to eat a lot of that bad debt, “not because the city is forgiving, but because it has poor legal standing to collect.”

“The deep pockets of the sizable commercial real estate developer are shielded from any liability.”

This puts the City of Rochester in a position that a lot of collection agencies find themselves in with an intractable debtor: having to convince RochWil that it has an obligation to fulfill its debt promises.

What are some of your tips and suggestions for the City of Rochester? I’d love to pull together several of your quotes and ideas for a story later this week or early next week. Share them below or email editor@insideARM.com.