Bay State Banner gets loan, draws attention to nonprofit

An obscure nonprofit corporation today made good on Boston Mayor Thomas Menino’s promise to loan $200,000 to the Bay State Banner, a weekly newspaper targeted to the African-American community.

The board of the Boston Local Development Corp., which generally makes loans to struggling small businesses, unanimously approved a two-year loan for the Banner at a 9 percent interest rate. Officials said Melvin Miller, the Banner‘s 75-year-old publisher, pledged as collateral his ownership in two homes in Roxbury and Meredith, New Hampshire.

The Banner, which suspended operations on July 9, is expected to resume publishing within the next two weeks, after the loan paperwork is completed. Ronald L. Walker 2nd, president of Next Street Financial LLC, a Roxbury-based merchant bank hired by Miller, told board members of the BLDC just prior to their vote that he expects to have a business plan ready for the newspaper within two months.

Walker told me that the newspaper has 10 full-time and 10 part-time employees. He says it broke even last year but began to experience cash-flow problems this year, when advertising revenue dropped and printing costs increased slightly. Officials say the newspaper, with more than $1 million in annual revenues, was running a roughly $140,000 to $150,000 annualized deficit when publication was suspended.

Walker and his aides express optimism that the Banner could return to profitability soon. “We’re in there now looking at everything,” he says.

Menino has said he arranged the loan to help a business important to Boston’s minority community, but it could also pay political dividends for him. The loan lets the mayor ride to the financial rescue of a highly visible institution in the African-American community during an election year.

The loan is also drawing attention to one of the perks of being mayor, the ability to use a little-known nonprofit corporation to hand out loans at below-market interest rates to businesses across the city.

John K. Dineen, chairman of the nonprofit’s board and a lawyer at Nutter, McClennan & Fish, says he has held that post for more than 20 years and never been contacted by Menino. At today’s board meeting, he made a point of saying the board is independent and could do whatever it wants.

Yet it’s obvious Menino wields enormous influence over the board’s activities. The mayor announced last Friday that the loan would be made without ever consulting Dineen. On Wednesday, Dineen told me that  all he knew about the Banner was what he had read in the newspapers. Today, after reviewing financial documents provided by the Banner, he voted along with the rest of the board to approve the loan.

The board operates like a small bank, lending out money obtained from federal and other grants. As that money is repaid with interest, the board lends it out again. “We’re not a giveaway program,” Dineen says. “We’re serious about recovering our money.”

Financial statements filed with the attorney general’s office indicate that the Boston Local Development Corp. loans money to a variety of businesses at various interest rates. The Boston Children’s Museum received the biggest and most unusual financial help: a $900,000 loan at a 1 percent interest rate.

The Children’s Museum loan far exceeds the nonprofit’s normal $250,000 limit. Officials said the bigger loan was made possible because the money for it came from the Boston Redevelopment Authority, the city’s planning and economic development agency. The BRA has oversight over the BLDC; several BRA employees handle the staff work for the nonprofit, and yesterday’s board meeting was held at BRA offices on Drydock Avenue in the Seaport area.

Jo-Anne Baxter, director of marketing and public relations for the Children’s Museum, says the $900,000 loan from the BLDC was used for a 22,000-square-foot expansion of the museum that was completed in April 2007. “It is a loan that we intend to pay back,” Baxter says.

C.F. Donovan’s Restaurant on Savin Hill Avenue in Dorchester received a total of $250,000 from the BLDC in two installments at interest rates of 8.25 percent. Other recipients include Family Discount Laundry in Mattapan ($150,000 at 8.25 percent), Ketta’s Hair Salon in Dorchester ($37,634 at 7.25 percent), and a Popeye’s Fried Chicken outlet ($140,569 at 8.25 percent).

The nonprofit reported $3.3 million in revenues and expenses of just over $2 million on its 2006 tax return. While the loan program is its primary focus, it also appears to be the conduit for money raised for literacy programs like Read Boston and Write Boston, as well as a program that provides financial assistance to homebuyers.