John Lewis closure spells trouble, some fear

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By Tom Saul | Thursday, August 28, 2008 |

Lorelie Pfautz pulled no punches Wednesday as she told a room full of community and social service agency leaders that John Lewis Community Services destroyed relationships with those who could help and was “so irresponsible” with its finances.

“We all realize that the picture for John Lewis is really, really grim,” Pfautz said. “We realize John Lewis is not going to survive. We lost an enormous amount of trust from the community.”

John Lewis grew from a small cafe, opened in 1989 to honor a homeless man who burned to death trying to keep warm, into a system of adult and youth shelters, a free meals program for the poor, job training and transitional housing. Now, it will shut down all operations Sept. 21.

Pfautz, the chairman of the agency’s interim board of directors, emphasized that none of John Lewis’ current staff or board members mismanaged money and that they tried to untangle the agency’s finances and get it back on its feet. But its insurmountable debt load and broken relationships made the task impossible.

Longtime John Lewis director Kate Ridge resigned last year shortly before the extent of the agency’s financial troubles became public. It was in debt by nearly $2.5 million to mortgage holders, the federal Internal Revenue Service, vendors and others through a series of financial missteps and involvement in tax credit development projects.

At the time, former interim director Matt Mendenhall said John Lewis allowed itself to expand and lose focus from its original mission of direct aid to the homeless. Ridge could not be reached for comment on the impending shutdown of the agency.

The shutdown will leave some vendors unpaid, Pfautz told about 50 community and social service agency representatives who gathered Wednesday at Davenport’s Friendly House. Wells Fargo Bank has already foreclosed on six of its properties. Its main shelter at 1016 W. 5th St. is mortgaged for $1 million to the Iowa Finance Authority, and no payments have been made in the past year.

John Lewis’ 28 employees have been notified that they will start seeing layoffs as of Sept. 7. Pfautz said she was “not completely sure” that the agency would be able to cover its final two rounds of payroll checks.

Ripple effects

But the agency’s troubles could ripple well beyond John Lewis and into the community, some at the meeting feared: More homeless people will appear on the streets or in abandoned buildings this winter, emergency rooms may become clogged with homeless who are injured or made ill by the cold, and other agencies will scramble to find shelter space for those they would normally send to John Lewis.

“I’ll be losing 17 beds for my transitional program,” said Sarah Oliver of the Iowa Department of Veterans Affairs who seeks help for homeless military veterans. “John Lewis has been vital to us. We’ll take care of our own people, but it’s going to be a lot more of a challenge.”

John Lewis also serves as the lead agency for $981,000 in annual federal Department of Housing and Urban Development grants for programs and services to the homeless in Scott County. While it gets the bulk of the money, other agencies such as Vera French Housing, Humility of Mary Housing and Family Resources also receive funding through the grants.

John Lewis gets $867,000 a year of the total sum, said Rick Schloemer, of the Scott County Housing Council, who wrote this year’s round of grants. If John Lewis disappears, so could the federal grant money it brings into the community for homeless programs.

“That is a substantial amount of money,” Schloemer said. “If that money were to leave the community, it would be very hard to get it back.”

Many of those present focused on the fate of the main shelter where John Lewis provided

temporary housing for 444 people in the 12-month period ending June 30, all of whom participated in other programs there. An unknown number stayed who did not seek other services, said Kelly Thompson-Reyes, grants and data manager for the agency.

Through the winter months, the shelter was at capacity on any given night, according to information put together by Thompson-Reyes. John Lewis has also seen increasing numbers of people seeking shelter during warmer months.

Ken Croken, vice president of corporate communications for Genesis Medical Center, asked what it would take to keep John Lewis in operation for up to another 90 days while community leaders try to figure out how best to deal with the problems the closing is likely to cause.

Croken also asked for, and those present agreed, to meet again next week after everyone has had a chance to meet with their respective boards to relay information and decide what to do next.

Some asked what it would take to keep the shelter open and running while closing down all other John Lewis operations. That could be complicated by the Iowa Finance Authority mortgage on the building, said Bret Mills, executive director of the agency who was present at the meeting.

The mortgage stems from a $1 million loan IFA made to John Lewis in 2006 to pay local vendors and consolidate debt, Mills said. Instead, at least some of the money went for developers’ fees and other uses it was not intended for. IFA was not kept abreast of financial problems at the agency.

“What is particularly troubling to us is the misrepresentations that were made to us,” Mills

said. “Had we known what the true financial picture of John Lewis was, we might have acted differently.”

Tom Saul can be contacted at (563) 383-2453 or tsaul@qctimes.com.

Other projects

The end of John Lewis Community Services also means the end of its involvement with such developments as Cobblestone Terrace at West 12th and Myrtle streets that were financed by federal tax credits sold to investors. Development of Cobblestone resulted in a fierce and prolonged fight with neighboring homeowners who repeatedly went before the Davenport City Council and the district court.

In a news release, John Lewis said it will turn over management of Cobblestone Terrace and two other such projects to a new property manager to be chosen by MMA Financial of Boston, which served as the seller of the tax credits for John Lewis.

Jennifer Olson, who led the fight against Cobblestone, said many predicted that John Lewis would eventually give up management of the 10 single-family complex because of financial difficulties.

“We just didn’t think it would happen this soon,” Olson said. “Now we have to worry about who they will get to manage it. My concern is for those immediately surrounding the project.”