Germantown Settlement: $38 Million in Debt

October 24, 2010; Source: The Philadelphia Inquirer | Germantown Settlement is an historic 126-year-old service agency/community development corporation with big problems. According to this article in the Philadelphia Inquirer, the agency raised and spent somewhere in the neighborhood of $100 million on community development projects in the recent past even as it was showing all the signs of fiscal distress and mismanagement.

Recent public audits (the few that exist) show that liabilities exceeded assets by rapidly increasing amounts in the first half of the decade, but more recent information may be harder to come by. The Office of Housing and Community Development has repeatedly sanctioned the group for a lack of audits and as of a few days ago the group has not filed required audits for years 2006 through 2009 with the department of Human Services.

Germantown Settlement and its community development arm, Greater Germantown Housing Development Corporation, with a combined debt of $16 million, filed for bankruptcy in the spring, but creditors have deemed the organization’s plan for recovering from bankruptcy insufficient. Germantown proposed to further refinance properties and find private grants to stabilize the organization’s finances, but creditors—including major banks as well as the city’s Redevelopment Authority—found the plan without merit. Rather than offering to refinance, the Redevelopment Authority said it would immediately foreclose on the Germantown YWCA, Nova Bank said it would foreclose on the Germantown Community Center, and Parke Bank plans to sell Germantown Settlement’s most viable commercial property, a shopping center on which the bank holds a $7.2 million mortgage.

This doesn’t add up to a group of financial institutions eager to refinance Germantown Settlement’s properties. Add to that the millions of dollars owed in taxes to the city and the state, and it appears that Germantown Settlement may be down for the count. The losses of course do not only accrue to the organizations and its funders, but also to the community. From the article, “Once hailed as a model community-development corporation, Germantown Settlement now holds a portfolio of largely bankrupt or collapsing projects. The Germantown neighborhood is pockmarked with Settlement’s shortcomings, including a shuttered charter school, boarded-up housing, and empty or poorly used retail space.”

Germantown Settlement’s problems predate the nation’s economic recession. Even without a recession, it is difficult to imagine that this venerable community institution could have survived without shedding much of its troubled real estate portfolio. Given the organization’s dire straits that led to its bankruptcy filing in April, one has to ask, what might have the major players in Philadelphia’s community development sector done much earlier to intervene in this dynamic and try to help fix some of Germantown Settlement’s obviously deep-seated problems?—Ruth McCambridge