Philadelphia Parking Authority lost more than $1 million on a failed real estate development led by ex-director Petri

The Philadelphia Parking Authority will lose at least $1.1 million it sank into the failed development of an impound and towing facility on the Delaware River.

According to the terms of a newly reached court settlement, the developers will pay the parking authority $2.1 million to settle a lawsuit over the 16-acre parking headquarters known as “Lot 9.” Located in the shadow of a decaying Port Richmond steam plant, the nearly three-year-long project went off the rails last year after the office facilities were found to be uninhabitable, as detailed in an Inquirer article last month.

PPA spokesperson Martin O’Rourke said the authority has ended its lease and is in the course of creating a new headquarters at another location.

Former PPA director Scott Petri — who was ousted in March amid a string of financial and operational missteps by the authority — signed a lease on the property in 2019, and personally oversaw the development’s logistics through the pandemic. The owner of the long-vacant industrial property, Chernow Development LLC, agreed to develop the administrative building and surface parking lots.

But problems quickly emerged when the PPA moved workers into the property last year. Sewage persistently backed up into the bathrooms. The Inquirer learned that building permits were not properly obtained for some of the work, and there were disputes over the whether the authority was properly licensed to occupy the property. Weeks after the move-in, the PPA pulled its workers from Lot 9 and began a lawsuit against the property owners and developers.

Under the agreement, Chernow has agreed to repay the PPA $1.9 million over the several years. T&M Associates, a New Jersey-based construction management firm retained for the project, agreed to reimburse a little under $200,000 in both cash and forgiven invoices.

That figure still falls seven figures short of the PPA’s investment.

Parking authority leaders have refused to publicly discuss the project due to the litigation. Even now, with the case settled, they offered few details about what happened, what went wrong, or whether Petri’s firing last month had anything to do with the botched real estate deal.

“The estimated total lost is $1,161,340,” said spokesperson O’Rourke, in an e-mailed statement.

» READ MORE: The Philadelphia Parking Authority sank millions into a new towing headquarters. Now it’s vacant.

An attorney for the owners of Chernow Development, George Mannosis and Sean Frankel, did not return phone calls and e-mails for comment. Phone calls to T&M Associates were not returned on Thursday.

Financial records obtained by the Inquirer showed expenditures on Lot 9 totaled more than $3.6 million. But O’Rourke said the estimated cost was closer to $3,483,340, as the authority expects to repurpose office furniture and physical assets purchased for administrative buildings. (Under the settlement, the PPA retains rights to the Lot 9 properties to retrieve belongings throughout the repayment period.)

PPA’s estimated loss does not include the hours that staff spent working on the project since 2019. Questions also linger over the project’s financing, which was tied to revenues shared with the city and school district, neither of which knew of Lot 9′s existence.

Last month, Kevin Lessard, a spokesperson for the city, said officials in the city’s Finance Department “do not recall nor have any records showing PPA informing us of these expenditures.” Lessard did not have any comment this week on the settlement.

The aborted Lot 9 project also troubled City Controller Rebecca Rhynhart, who last month called it “indicative of the fact that the PPA isn’t accountable to any city or state oversight.”

“There’s no transparency and accountability around what they spend,” she said.

» READ MORE: Philadelphia Parking Authority abruptly ousts executive director Scott Petri

PPA General Counsel Dennis Wheldon, who, with Petri gone, is now serving as the PPA’s interim director, declined a request for an interview on the project. Board chair Beth Grossman declined comment.

The other PPA board members who approved the settlement — vice-chairman Al Taubenberger, Lynette Brown-Sow, Patricia Furlong, and Obra S. Kernodle, IV — either declined to comment, did not respond to requests for comment, or had voice mail systems that were full and would not accept new messages.

With the PPA out for good, it remains unclear what the future holds for the old Richmond Generating Station, which has sat dormant since its 1985 closure. Records show the owners sought historical designation for the hulking Beaux Arts-style plant and, last year, won $1 million in state grants to restore the 500,000-square-foot building.

“What happens with Lot 9 — that is no longer a PPA issue,” O’Rourke said.

Next up? Lot 10.

O’Rourke confirmed the PPA is in the process of rebuilding its impound headquarters on Oregon Avenue in South Philadelphia.

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