Dear Valued Members and Community Partners:
We are very happy to announce that the Shiawassee Regional Chamber of Commerce has been cleared of any wrongdoing in the management of the Owosso Armory redevelopment project. The findings come from a lengthy investigation by Owosso Public Safety and the Shiawassee County Prosecutor's Office that began in 2022 at the request of the chamber.
Needless to say, we are very pleased that the investigators found nothing illegal. We appreciate the partnership we’ve formed. We’re also extremely appreciative of the hard work of our staff, and the patience and understanding of our members and community as we’ve navigated this challenging time.
Putting together a project of this magnitude, particularly a historical preservation effort, is time consuming and complicated. Several individuals and entities – including developers, financial institutions, leasing agents, state agencies and past chamber leaders – had to work closely to make it happen. When potential financial discrepancies were discovered, current chamber leadership felt it was essential to have an objective assessment of the administrative processes.
The discrepancies centered around what seemed like questionable leasing practices, differences in leasable square footage and proformas from the project’s accounting firm and construction manager, and whether any funds were diverted from the project. For example, there was concern that leases for potential tenants and inflated amounts of space were used as evidence of potential revenue generation to gain financing, although some of the tenants never moved into the building. Some who did move in paid significantly reduced rental rates below those used for funding purposes. The board had also uncovered questionable accounting practices related to the complicated funding structure of a historical building.
All of this has led to the Armory and chamber facing financial hardship. The original projections for The Armory project overestimated revenues and underestimated operating expenses. The losses sustained have caused the not-for-profit chamber to subsidize the Armory with funds that were not intended for the project.
Lead Detective Jon Cecil agreed with the board’s feeling that some of the evidence raised suspicions of fraudulent activity. Through materials reviews and interviews, however, there was no evidence to support beyond a reasonable doubt that anyone involved in the redevelopment project committed any crimes.
We are currently operating in the black. The Armory is still at a deficit, though the gap was closed considerably by refinancing loans last fall. Approximately 80 percent of the building is leased, with prospects touring the facility on a regular basis. It is also meeting its mission of being a driving force in the successful development of diversely owned and operated businesses, and serving as a beautiful, centrally located space for community and third-party uses.
Proactively seeking an outside investigation indicates our commitment to transparency and a desire to ensure the accuracy and integrity of financial reporting. It's essential for organizations to conduct thorough investigations when financial discrepancies are identified, and involving law enforcement can add an extra layer of credibility to the process. In this case, we believe the positive outcome of the investigation should help restore confidence in The Armory project and the chamber's financial practices.
The chamber board has put new controls in place to ensure additional measures to strengthen financial oversight. Transparent reporting mechanisms and ongoing communication with stakeholders will result in a more robust and trustworthy financial management system.
People making decisions during the project trusted the experts leading the redevelopment, some of whom misled chamber leadership. Decisions made seemed right based on the information given to them. Despite the hardship all of these missteps have caused, the chamber is working very hard to rebuild itself and regain the trust of its members and the community. Their faith in us is a big part of why we’re still here after 121 years.
Read the Shiawassee County Prosecutor’s Office Release Here
What is the chamber doing to remain viable and sustainable?
-Our focus is on our mission: To connect leaders and support entrepreneurs so that together we build an extraordinary Shiawassee Region.
-We will leverage our strength as a convenor of businesses, nonprofit organizations and partners – such as the Shiawassee Economic Development Partnership and Owosso Main Street.
-We finished a three-year strategic plan in June. It is an essential guide for our decision-making.
-Recently, significant updates were made to our membership and marketing opportunities, offering our current and future members several new options to grow their businesses.
-New ideas for non-dues revenue are always being considered.
-We’re welcoming new members and program sponsors regularly.
-Staff is evaluating every program and event for its cost-to-benefit ratio, with our members’ needs in mind.
What was the original purpose of the Armory project?
-The chamber envisioned a regional hub for businesses and commerce in the only Class A office space in Owosso. Several start-ups or newer businesses have successfully incubated in The Armory and moved to bigger spaces.
-The Armory is 80 percent leased and successfully meeting its mission of being a driving force in the successful development of diversely owned and operated businesses, and serving as a beautiful, centrally located space for community and third-party uses.
-There are a variety of workspaces and flexible lease options available, starting as low as $125/month.
-Because of the diversity of its tenants and the vision for a space that welcomed arts and culture, The Armory project was the first of its kind to receive funding from an Owosso Main Street partner organization: the National Trust Community Investment Corporation. NTCIC’s Irvin Henderson Main Street Revitalization Fund made its first allocation – $1.2 million in New Market Tax Credits – to The Armory, which paved the way for future projects like it in other small towns across the country.
Why weren’t the financial issues found sooner?
-As soon as it became clear to the chamber board and staff that the Armory was not making its ends meet, our operations committee began its own internal review of the financials. That’s when we realized we needed to contact law enforcement.
-The board made the best decisions it could with the information it had at the time from the stakeholders involved.
Who were the stakeholders?
-Board of directors
Have member dues been used to pay for The Armory?
-Yes. Dues revenue is used primarily for member programming and benefits; however, the chamber’s general operating fund has loaned money to The Armory for operating costs.
-Our members are our first priority. They’re the reason we’ve been in business for more than 120 years.
-We’re committed to our mission of connecting leaders and supporting entrepreneurs so that together we build an extraordinary Shiawassee region.
How much does The Armory owe the chamber?
How much is owed on The Armory?
Can The Armory be sold?
-It is the chamber’s plan to sell The Armory once we fulfill our obligations to our lenders.
Is the chamber going to file bankruptcy or close?
Will the chamber be taking any further legal action?