Why Erie County Executive Davis seeks details on ECGRA's loans to community lending firms

The Erie County Gaming Revenue Authority is no stranger to audits.

The authority, which administers millions of dollars in casino gaming revenue every year to spur economic and community development, undergoes an annual audit by independent accounting firm Maher Duessel.

The audits, which are required by ECGRA’s charter and shared each year with Erie County Council and the office of Erie County Executive Brenton Davis, consistently show that ECGRA fairly and accurately reports its finances, as stated in ECGRA’s five most recent audit reports obtained by the Erie Times-News.

But for Davis, who’s recently voiced concerns about ECGRA’s financial management, the audits haven’t been detailed enough.

In recent weeks, the county executive has requested an exhaustive list of financial information from the authority, including, among other things, years of credit card statements, contracts, financial interest reports, check detail reports and every payment ever made to ECGRA Executive Director Perry Wood.

Davis has stated his goal is accountability, transparency and ensuring taxpayer money is not being wasted. And while many of the materials requested are already checked by Maher Duessel, some information is not.

Here’s what Davis is looking for.

Davis seeks details of lending terms

Davis is requesting to see a comprehensive and detailed report on the status of ECGRA’s loan portfolio ― specifically, the performance of each loan, their delinquency and collectability status.

The latest ECGRA audit indicates the sum of ECGRA’s loan agreements ― roughly $9.5 million ― and the combined outstanding principal balance ― about $7.9 million ― but it doesn’t indicate how loan recipients, particularly lending institutions, invest that loan.

For example, ECGRA in 2016 entered into a $1 million loan agreement with Bridgeway Capital, a Pittsburgh-based community development financial institution.

The CDFI, which also has an Erie office, leverages that funding and issues loans to local businesses, predominantly minority-owned businesses in distressed areas that can’t access capital on their own.

The Davis administration has noted that ECGRA’s audits don’t identify those recipient businesses or the amount that Bridgeway Capital loans out to them and at what interest rate.

“If we’re giving gaming revenue to private institutions like Bridgeway and others, we want accountability of that money,” Erie County Public Information Officer Chris Carroll said. “We want to know how much has been deployed by Bridgeway and whether Bridgeway has taken money off the top.”

Davis reiterated this point during a recent interview with Talk Erie, suggesting ECGRA could be issuing a loan to a lender institution at 0 to 1% interest, and that institution, in turn, could be loaning that money out at “exorbitant rates.”

“How is that not viewed as predatory?” Davis asked.

Finance Committee chairman: CDFIs are investment in community

Wood told the Times-News that Maher Duessel doesn’t analyze how lending institutions like Bridgeway Capital invest because those decisions are made by the Bridgeway Capital staff.

Wood said ECGRA insulates itself from those decisions and instead invests in the “established process” of Bridgeway Capital as a longstanding and reputable CDFI, an economic development bank that has the staff, resources and know-how to analyze bank loans and screen recipients.

Indeed, Bridgeway Capital Communications Director Katherine Chamberlain told the Times-News that CDFIs have been a “part of the national financial ecosystem for over 50 years.”

Moreover, she said, Bridgeway Capital, like other CDFIs, is certified and regulated by the U.S. Treasury Department.

“In its 34-year history, Bridgeway has always repaid 100% of the principal of the loan capital lent to us by public and private sources, plus interest,” she stated.

Erie County Councilmember Rock Copeland, who serves as finance committee chairman, further defended CDFIs, telling the Times-News that "these are the kinds of organizations we need in Erie to recognize small businesses and to give them opportunities to grow."

"A (CDFI) is a bank that doesn’t operate under the normal parameters of a bank where they’re loaning to realize a return on investment on themselves," he said. "They’re loaning on a return on investment for the community."

"ECGRA builds communities and builds capacity in our communities to do more," he added.

Wood said ECGRA staff will provide the administration the requested information on the loan recipients.

A.J. Rao can be reached at arao@gannett.com. Follow him on X @ETNRao.

This article originally appeared on Erie Times-News: Brenton Davis seeks details on ECGRA loans to community lending firms