Zanesville Times Recorder (Ohio) - by Kathie Dickerson

Residents of the city previously eligible for assistance from the Community Development Block Grant program may not have access to those funds for the next two years.

The funding is being withheld until the city agrees to repay $700,000 in federal grants awarded to help with infrastructure to the Coshocton Ethanol plant on County Road 271.

"We have no option other than to ask for the money back," said Mike Hiler, deputy chief of the Office of Community Development.

The Ohio Department of Development has placed grants on hold to the city administered through the Office of Community Development, and in addition "awarding of future grants to the city by OCD or the Ohio Department of Development might be in jeopardy," according to a letter sent to the mayor on Sept. 23.

The city was given two deadlines, and representatives of Coshocton Ethanol have met with the state twice in the past 18 months, Hiler said. Each time, information was presented on how the company planned to reopen the plant that's been idle for almost three years.

"We feel for the city, but it's due diligence to our program to make sure the state is complying with how the federal funds are spent," Hiler said.

It doesn't happen often the state has to ask for repayment of grants, he said. It seems to flow with the economic times, when one to three awards may be recalled one year, and none another year.

Part of the requirements of the Housing and Urban Development and Appalachian Regional Commission grants was to make sure the company created at least 41 jobs and that 51 percent of those employees met federal low-to-moderate income guidelines when they were hired, Hiler said.

Only 38 percent of the employees, or 16, of them did, said Mary Oakley, ODOD community and economic development manager.

Representatives of the ethanol plant argue differently, said Mayor Steve Mercer, and have presented information to the city he thinks proves the guidelines were met.

The grants were administered on the city's behalf by the Ohio Regional Development Corp., a private company.

"The city of Coshocton did comply with all the regulations placed on it to apply, receive and administer the funding it received for the ethanol plant," ORDC President Dale Hartle said.

The funds were used to provide electric service to the ethanol plant on County Road 271 and make upgrades to the city's wastewater treatment plant in order for it to be able to receive the waste from the ethanol plant, Hartle said.

Mercer said the city is in no position to repay $700,000; however, an Aug. 19 letter asked for a payment of $10,000 be made by Oct. 1, and that the city agree to terms that included increasing payments for the next year, with a balloon payment of $450,000 due by Oct. 1, 2012.

"Why agree with the terms if we can't afford to repay the money within a year," Mercer said. "Paying $10,000 would have only delayed this by a few months."

Instead, the city will forgo CDBG funds unless the ethanol plant gets open and can meet the low-to-moderate employee income guidelines. If it reopens and meets the requirements, the city will not have to make any remaining payments.

Hartle said CDBG money can be used for multiple things, like removing a blight from any area of the city, working on water lines, sewer lines and parks. Those are some of the issues addressed with the funding in the past.

A federal Housing and Urban Development program, its directive is to help communities provide decent housing and neighborhoods for low- and moderate-income people.

Documents from the city auditor's office show that Coshocton spent $256,382 in CDBG funds in 2010, and $534,563 in 2011.

Those funds were disbursed to prevent homelessness by providing rental assistance, to make home improvements to qualified owners or to prevent shutoff of necessary utilities.

"Besides affecting the city, it's also affecting the citizens who need the assistance," City Auditor Sherry Kirkpatrick said.

About $44,100 of CDBG funds was used to repair streets in 2011, and $4,375 in 2010.

Mercer said this latest development could be added to dollars the city is seeking through a civil suit filed in Coshocton County Common Pleas Court.

A trial date of May 11 has been set for that case, and Mercer said he's not aware of any other civil claims against Coshocton Ethanol.

The city filed the breach-of-contract suit in June against Coshocton Ethanol LLC, and its original developer, John Baardson. It's been more than two years since the ethanol company has paid anything into its share of a $7 million loan repayment program for providing sewer access, which puts it behind about $450,000.

Coshocton Ethanol has filed an answer to the suit which denies most of the allegations.

Construction at the plant was completed in 2008 and production began in February. However, by December 2008, 30 of the 43 employees were placed on furloughs, expected to be temporary. Most of the employees officially were laid off in February 2009.

The state also is pressing the Coshocton Port Authority to begin repayment of a $500,000 grant to buy property for the ethanol plant, because the project has not met its commitment of creating more than 40 jobs. Port Authority Director Dorothy Skowrunski said there isn't anything new on the part of the port authority.