Homestead officials have given up on bringing bowling back to the city, but turning the old property into a car dealership could pose a financial risk later on, the city manager warned.
Nonetheless, the Homestead council Wednesday approved the $2.3 million sale to James Rivchin, owner of RT Automotive LLC, who plans on turning the bowling alley on 111 S. Homestead Blvd. into a Hyundai dealership.
The property, built in 1991, was renovated after Hurricane Andrew through the Community Development Block Grants program of the U.S. Department of Housing and Urban Development in 1994. But changing the use of the property could make the city liable to pay back HUD for the sale of the alley.
“There is basically an unknown liability here,” said George Gretsas, city manager. “While nobody can answer that question definitively ... our lawyers advised we shouldn’t assume that liability. I assume the buyer’s lawyer advised he shouldn’t assume that liability, and that’s the dilemma.”
The city has received four letters from HUD over the years, three of which determined the city is no longer liable because of the grant program. However, one HUD letter from May 2011 stated the city would be liable.
Upon Rivchin’s request, the council ignored the city attorney’s advice and approved removing a provision of the contract that indemnified the city from the HUD requirements.
“What I see happening, there are potential deal busters in the life of the contract,” said Councilman Jimmy L. Williams III, who argued that while there is a contradictory letter from HUD, the most recent letter, dated June 2011, stated the city was not liable.
The provision in the contract had not been an issue before because, until now, the city had been determined to find a buyer who would reopen the bowling alley.
Meanwhile, the city has been accruing interest on a loan given out to an agency within the city — the Community Redevelopment Agency — for 4.2 acres of the rundown homes in 2007 in an effort to bring more development. Homestead needed at least $2 million from the sale of the bowling alley to pay back its debt.
Along with the sale of the bowling alley, the council also approved to stop the accruing interest on the city’s loan to the CRA.
Follow Rebeca Piccardo on Twitter: @rpicc002.