Investment in minority-owned business fails to pay off

In March 2012, Cincinnati’s city council voted to give $684,000 in grants to help restore space at the Banks (a mixed-use development project on Cincinnati’s riverfront) for a restaurant project called Mahogany’s and to loan an additional $300,000 to the restaurant to buy necessities and begin operations. The stated intention of these actions was to draw an African American-owned business to the city’s rapidly developing Banks project.

In August 2013, however, owner Liz Rogers began falling behind on payments to the city, and in March 2014 she began to fall behind on rent payments. On Sept. 2, the landlord served Mahogany’s an eviction notice. Mahogany’s closed for good on Sept. 12.

Rogers has claimed that the city failed to deliver on its promise of further development, including the construction of a hotel and a condominium complex. For this reason, she began mounting a lawsuit against the City of Cincinnati but, on Sept. 14, offered to drop the charges in exchange for forgiveness of her $300,000 debt. The City Manager refused the of fer three days later, and Rogers dropped the charges, instead pleading for dialogue.

There is no universe in which the city could have forgiven Rogers’ loan. The signed agreement functioned just as any loan does, and, regardless of the aspirations the city has regarding its Banks project, the success of other ventures is not a precondition for the return of money borrowed.

The greater issue is how the city allowed almost a million dollars of funding to go to a private project which failed so rapidly. Don’t misunderstand — the impetus makes sense: the city’s new Banks project does not represent the diversity of the city, and city officials hoped to attract a flashy, African American-owned business. The execution, however, does not make sense.

Allow me to present a not-so-hypothetical scenario: a small business owner asks for a $300,000 loan (and a $684,000 grant, but let’s ignore that for the sake of the hypothetical) to open a new location of her under two-year-old restaurant, a notoriously risky type of business endeavor. This owner discloses from day one that she has had legal and personal financial troubles in the past, and records show that she never showed up to a previous court date regarding disputes with a contractor. Finally, this new business wishes to exist as part of a new mixed-use project still in the first stages of development.

Alright, one might protest, but there’s more to it than that. Sure, there is more, but it fails to make the situation any better.

For instance, the fact that these were public funds and not private investments makes things more startling. Taxpayer money, which had been set aside for the advancement of Cincinnati small businesses, was gambled and lost here.

Yet there is one more extenuating circumstance. The 6-3 city council decision made in 2012 was professedly racial in nature. City Council’s attempt at diversity and inclusivity, however, has helped no one.

In theory, City Council sought to provide Rogers a chance to succeed and ordain her as a symbol of the importance of minorities in the economic revitalization of downtown Cincinnati. In reality, City Council set Rogers on a pedestal without seriously considering whether she, as a businesswoman, could keep her end of the deal. Even worse, by loaning her such a huge sum, the city put itself in a position in which, when she failed, it could only watch as she fell.

Worst of all, the city has created a new barrier to the future aid of minority-owned businesses The visibility of the Mahogany’s fiasco has acted as a case study for those who tout the risks of racially-based city assistance. A little time and consideration should have led the previous council to realize that any attempt to help bring an African American-owned business to the Banks not only had to look good starting out but also had to make some level of business sense. Instead, the city has done more harm than good to itself and the minority communities it hoped to serve.