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Nonprofit files for bankruptcy, delaying $300K repayment to city

New Horizons files for bankruptcy, a move which may delay repayment of taxpayer money.

October 31, 2011|By Brittany Levine brittany.levine@latimes.com

A defunct nonprofit entangled in financial issues that promised to repay hundreds of thousands of dollars it owed the city of Glendale has filed for bankruptcy, a move that may stall those plans.

New Horizons Family Center filed for Chapter 7 bankruptcy on Oct. 25, according to court records.

The nonprofit faces liens, legal issues and a lengthy list of creditors.

“Obviously it puts taxpayers’ money at risk, so I’m concerned about that,” said Councilman Ara Najarian, who has long complained about city oversight of New Horizons. “The city needs to make sure that our money, the taxpayers’ money is repaid.”

New Horizons provided child-care services to low-income families in Glendale from 1994 through last year, receiving more than $1 million in federal community block grants and stimulus money for social services and capital improvements since 2000.

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The nonprofit shut down after funds for a multimillion-dollar building project fell through. Despite the fact the group had been facing financial problems, the city gave New Horizons about $300,000 in federal funds. The ensuing fallout spurred a new vetting process for nonprofits seeking aid from City Hall.

City Attorney Mike Garcia said the bankruptcy doesn’t necessarily mean the city won’t get paid, but it affects the timing of when that will occur.

According to the bankruptcy filing, the nonprofit has estimated assets and liabilities of between $500,001 to $1 million. New Horizons sold its Glendale headquarters this summer to a local businessman for $1.73 million. That money went to pay back government grants and back taxes. The state got about $1.5 million and Glendale got $46,000.

J.P. John Perron, New Horizons’ real estate broker, said the nonprofit has also planned to pay back the city from about $1.4 million it expects to make by selling properties in the 1200 block of South Maryland Avenue to a Los Angeles-based affordable housing developer called PATH Ventures.

PATH is in escrow on the properties with the sale contingent on city approvals and funding to build an affordable housing project for military veterans. Those approvals have been on hold as the city grapples with court issues that leave the future of its redevelopment agency uncertain, said John Molloy, PATH’s executive director.

“We very much would like to develop this property,” Molloy said. “We’ll wait for the court to determine how they see it and what they want us to do.”

In addition, New Horizons was set to go to trial regarding a lien Glendale-based George Hopkins Construction Co. placed on the South Maryland Avenue properties. The company claims the nonprofit owes Hopkins more than $200,000 for construction work connected to the scrapped child-care center, said Hopkins’ president, Gary Hopkins.

“The bankruptcy filing was to put off the trial,” he said.

Perron said the construction company was uncooperative when it came to negotiations — a claim Hopkins denies — pushing New Horizons to file bankruptcy.

“That was a game changer,” Perron said, adding that if the nonprofit battled with Hopkins in court, it would eat up PATH Ventures’ money expected to go to the city.
 
 

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