Business & Economy

The hole in Newport swallows up a lot of hopes — but not all

Newport
Overlooking the demolished block on Main Street in Newport. Photo by Elizabeth Hewitt/VTDigger

NEWPORT — When Mike and Laurie Desautels opened a UPS store in downtown Newport in September, they expected their business to steadily grow.

The Desautelses set up shop in the Main Street storefront adjacent to a razed city block planned to be the future home of the Renaissance Block project, which would include shops, offices and a hotel — one of a slew of development projects in the area spearheaded by Florida investor Ariel Quiros and local businessman Bill Stenger.

“It was a good time to go into business,” Mike Desautels said Friday afternoon.

Newport
Laurie and Mike Desautels opened a business in Newport last year. Photo by Elizabeth Hewitt/VTDigger

But the couple’s faith in the future of their business was shaken last week with the announcement that Quiros and Stenger are facing federal and state civil charges over what regulators described as a “Ponzi-like” scheme.

The news may mean the couple need to reduce their five-person staff by one, Mike Desautels said.

“Now you’ve got to try to make do with what’s here,” he said. “And Newport is a poor town, so you’ve got to work that much harder to try to make your business survive.”

Big promises

In the wake of Thursday’s news, Newport locals reacted with a mixture of disappointment, anger and a few I-told-you-sos. But many retained faith that the community will be able to weather the challenges.

The site of the Renaissance Block project is a part of daily life for many locals. A chain link fence, draped with banners promising redevelopment, runs along the southern side of Main Street.

Behind the fence, the sidewalk drops off into the foundations of buildings that are no longer standing. On the far side of the lot stands the one structure that was not razed: a brick chimney that, once upon a time, belonged to a bakery.

In December 2013, Quiros purchased that entire block in downtown Newport for $2.85 million; he and Stenger intended to develop it with money from foreign investors through the EB-5 visa program.

The two said they planned to plow hundreds of millions of dollars into the block to build a mixed-use development with retail and office space, as well as a hotel that was meant to provide long-term rentals for workers at AnC Bio Vermont, the planned U.S. wing of a Korean biotech company Stenger and Quiros also hoped to bring to Newport.

Stenger and Quiros collected nearly three-quarters of the money to build the $110 million biomedical research center, which was in reality “nearly a complete fraud,” according to the Securities and Exchange Commission.

Quiros bought the Renaissance Block property through G.S.I. of Dade County Inc., which is among the companies whose assets were frozen and placed into receivership by a federal judge in Miami last week.

G.S.I. of Dade County is a company Quiros formed in 1994, according to documents filed with the Florida secretary of state. Quiros remains the sole director.

Neither project is likely to be completed anytime soon, because of the asset freeze and the fact that the SEC says “there is little money left” in the AnC Bio accounts for construction, as a result of Stenger and Quiros’ alleged misuse of investor funds.

Newport
A banner advertises the Renaissance Block project. Photo by Elizabeth Hewitt/VTDigger

In the meantime, the entire block, which had been home to nine historic buildings and several small businesses, was cleared in March 2015 with state approval, leaving a gaping hole in downtown Newport.

Merry Hamel used to work in a building on that block. Her workplace, which she preferred not to identify in this story, was evicted to make way for the Renaissance Block project. Many people who lived in the apartments there had to relocate too, she said.

Now, the empty lot on Main Street is “disheartening,” especially given that many locals worked hard on building up and improving the downtown, Hamel said Friday.

Hamel recalls that the community was told many times over that Stenger and Quiros’ projects would bring a tide of jobs and economic growth. That fostered a lot of hope among people looking for stable employment and jobs closer to home, she said.

“I think that the loss of that hope and the disappointment is the biggest impact on this area,” Hamel said.

Ultimately, Hamel expects lower- and middle-income residents of the area will feel the brunt of the loss of the projects.

“The people who can come here and ski and use the water park (at Jay Peak resort) can still continue to do that and have fun, and it’s not really going to have any kind of negative impact on them,” Hamel said. “The people that get hurt the most are the folks that are already struggling.”

Brenda Simons, who grew up in Newport, considers the situation “a total disaster.”

Simons opposed the proposal for the Renaissance Block long before the news broke last week — largely, she said, because she did not see the development as being accessible to locals who likely could not afford the services there.

In the meantime, she is disappointed by what the downtown area has become.

“I don’t see any reason why anybody would even come here anymore,” Simons said, citing a lack of shops and restaurants downtown.

Seeing beyond the latest blow

Manfred Rieder, a working artist who spent Friday afternoon volunteering at the MAC Center for the Arts on Main Street, said he predicted more than two years ago that Stenger and Quiros’ projects would collapse.

“I see a Ponzi scheme and I smell one,” Rieder said.

Rieder said he feels bad for people who invested money in the projects, but he does not think Newport will be much worse off.

The jobs at the AnC Bio facility were unlikely to go to locals in the long run, he said, and many of the positions at the nearby ski resort would have been part-time and seasonal.

Though not a fan of the fenced-off hole in the center of town, he does not see it as a bad thing. Many of the buildings on that block needed to be taken down anyway, he said, and he likes the prospect of converting the lot into a park, which the developers are required to do if they don’t start construction on the project by Sept. 1, 2017.

Steve Mason, a consultant based in town, was born in Newport. He returned 10 years ago after spending more than three decades away. He said the town is resilient.

“We’ve been through the death of the small farm. We’ve been through the death of the railroad,” Mason said. “This is just another pebble in the road.”

Mason said he was very supportive of the projects. Though he was disappointed and surprised by the news and the allegations of misconduct, he is hopeful that the companies will fare well under the receivership.

He also said other exciting, positive things are happening in the area.

“The town still has all the assets it did before,” Mason said.

Greg Hamblett, co-owner of the Pick and Shovel, noted that the news leaves downtown Newport with a sense of uncertainty about what will come next.

Paul Monette
Newport Mayor Paul Monette stands in front of what was to be the site of the Renaissance Block project in his city. Photo by Elizabeth Hewitt/VTDigger

“It’s kind of too bad that someone let it happen,” Hamblett said. “Somebody drank the Stenger Kool-Aid and jumped on board.”

Mayor Paul Monette said Friday that in the wake of the news, his priority is figuring out what will happen to Main Street.

“That’s a big chunk of downtown,” Monette said.

Monette said that what comes next is a question mark. He’s been in contact with Gov. Peter Shumlin and hopes to be meeting with him this week to figure out the next steps.

“We don’t know right now,” Monette said. “It’s very preliminary. We’re letting the dust settle.”

But Monette was quick to emphasize that the projects headed by Stenger and Quiros were not the area’s only economic development options. The town “didn’t have all our eggs in the basket with EB-5,” he said.

He said there have been inquiries from other companies, though he said he could not provide specifics.

For now, Monette is trying out a new phrase: “You’ve heard of ‘Vermont strong.’ Well, we’re ‘NEK strong.’”

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  • Annette Smith

    This does present an opportunity. What does the community want in that location? Instead of Stenger’s plans, what does the area need? A park? Housing and businesses downtown? A movie theater? An opera house?

    There are plenty of people with money who need to start investing it without an eye for profit. Seriously, how much do you need? And you know how good it feels to give it away.

    Bill Stenger and EB-5 money and federal dollars garnered by our congressmen have become a bad habit, always with a hand out saying feed me feed me.

    For downtown Newport, this may be the best thing for the local community. What are their dreams? How about working with the people to feed themselves?

    Newport is a beautiful town with a chance for a fresh start.

    • Newport is Genuine by Nature. That is why community members themselves decided on that tagline to describe what they believe matters in describing Newport to each other as well as people who live, work and play there and people who are considering investing in Newport.

      Newport has ‘Community Commons’, a monthly community meeting, established in 2013 to address the anxiety community members felt from the prospect of the Big Developments. Some felt this was happening To Them. These monthly meetings remind us that Community Members Do Have The Power to Make Positive Changes in their neighborhoods and community. They do have the power over things they can control.

      Some people who have come to Community Commons started a conversation with fellow community members and continued working together to establish a warming shelter and recovery center. The effect of opiates on community safety happened first in Community Commons. The list goes on…

      Truth is spoken to power in a civil manner… because we practice an assets-based approach to solutions to challenges… relationships begin… partnerships are strengthened… Community Commons is on the 3rd Wednesday of the month at The Gateway (6p – 8p) with delicious optional potluck.

      Newport is The First & Only Age-Friendly Community in Vermont. It serves as a model for other remote rural communities in the national and international network it is member of (http://bit.ly/1KInYYS). Through collaboration with a team of community members including business and community leaders, Newport has a new Age-Friendly Community *Action* Plan (http://bit.ly/20PQSMv). AARP Vermont provides $5K in community action grants for initiatives that have included the Fresh Start Community Farm (http://bit.ly/1zlhqGR), a bike share program, and Now Playing Newport! (a music program that provides special access to people of a higher age as well as a good meal).

      The Orleans County Restorative Justice Center (kingdomjustice.org) is the convening organization for Community Commons since it began. AARP Vermont is a supporter of Community Commons (http://bit.ly/1WaVPPd), joining Community National Bank and the City of Newport. The first investment came from the Vermont Community Foundation through its Innovations and Collaborations program.

      Since the American Institute of Architects (AIA) awarded Newport its first grant in Vermont, in 2009, for a Regional/Urban Design Assistance Team (R/UDAT), the citizens of Newport have been actively practicing an assets-based approach (http://bit.ly/22HmrHJ). What Do We Have? That will tell us what we don’t have. That will tell us Next Steps.

      In 2010, community members and business leaders met every Friday morning for months to develop the first form-based zoning code to be adopted in Vermont. That means however the empty block will be eventually developed it must be done on a scale that is people-friendly with mixed-use and honors the fabric of Newport’s historical architecture… it cannot be a monolithic big box (http://bit.ly/1SUImpM).

      Newport and its neighboring communities’ members are invited to the monthly Community Commons meetings. Onward with CHEERS!

    • Jamie Carter

      What does it need? What do people want? They need and want good jobs that are not tourism based… they need, oh say a BIOTECH plant.

      • Willem Post

        Jamie,

        They need very low/zero-interest mortgages to build zero-net energy and energy-surplus housing to prepare themselves for the future.

        Such new housing would be located in the empty space.

        In Denmark, mortgage interest rates are negative, i.e., people make monthly payments, and all of it reduces the principal, plus they get a credit on their accounts, which can also be used to reduce principal. It has greatly increased construction of energy-efficient housing.

        Building and equipping such housing provides lot of jobs.

        Where to get the money?

        Eliminating Efficiency Vermont would make available about $65 million per year, enough for subsidizing several hundred million dollars of mortgages each year.

        • Jamie Carter

          There isn’t exactly a housing shortage in Newport VT.

          • Willem Post

            Jamie,

            There likely is plenty of energy-hog housing that needs to be replaced.

            Filling in the hole would result in people living in the center of town.

          • Jamie Carter

            People need jobs first and foremost, energy efficiency is a worth goal, but you need a job to buy a house. This area needs jobs more then anything. Then they can afford to make their homes more energy efficient.

          • Randy Jorgensen

            The Carbon tax will do it for them.

          • There is a serious housing shortage here. The vacancy rate is about 2%. A healthy vacancy is 6%. Existing housing stock is old. Rent rates are comparable to cities MUCH bigger than ours. It can inhibit our health and growth.

  • Don Peterson

    Despite the feel good rhetoric, lets recall that at one point Stenger promised the NEK 5000 new jobs– and this in an area with a total population of 25000 people total. You bought that improbable number and jumped in with both feet.
    To turn the center of Newport into a gigantic park is more urban thinking– the whole county is a park.
    I’m sorry, but this debacle mirrors the state of leadership in general– overawed by money and greedy for a seat at the table.

    • Rob Pforzheimer

      I was at Burke Mtn when Stenger promised not 5000, but 10,000 jobs.

      • Willem Post

        Rob,

        Hyperbolic promises by Stenger, when he knew In 2008, as part of the Ponzi scheme, he and Quiros ILLEGALLY transferred $25 million of Jay Peak EB-5 funds to a Miami brokerage account over which Quiros had sole control.

        The Miami funds were used to “purchase” Jay Peak. Some of the funds were used make improvements to Jay Peak’s ski slopes, which was an illegal use of funds.

        The transfer created a $25 million hole in the budget for the authorized Phase I and II projects at Jay Peak, PLUS it would create a hole in the funding of projects in Newport.

        It is very likely, Leahy, who claims to be a friend of Stenger, and Shumlin and the Vermont Department of Financial Regulation, under Susan Donegan (running for governor), which oversees the EB-5 program, knew about the illegal Jay Peak purchase, because the Vermont media reported it.

  • Linda Elbow

    Linda Elbow
    Yes, the big hole in downtown Newport is depressing, but it is not the end of Newport.
    I live 25 miles for there, and I go there often, even though I consider Hardwick my big city.
    I regularly visit government offices, The Front Desk, the Pick and Shovel (and attached
    ice cream stand!), the laundromat, and Newport Natural Foods and Montgomery Cafe,
    where I often get a sandwich and eat on one of the benches on the beautiful water front.
    More low cost housing is definitely needed, and more businesses would be welcome. I miss the book store and the kitchen supply store, but I guess they closed because they weren’t getting enough business.

    • Win DeWitt

      I think first and foremost consider other small cities that are thriving and study them to see why they thrive. Also consider other small cities that are depressed and find out why. Learn from those cities and act accordingly. No one needs to be venturing “guesses” about what to do with the big hole. Study and learn from other small cities.

      • Susan Watson

        Yes, this is a great idea. Littleton NH did this when Walmart came to their town. We can learn from them.

    • Morgan Como

      I’m not fair from newport at all. They don’t need a park they have gardner park right down the road. They don’t need more housing there is plenty. Those stores shut down because they were evicted from their place of buisness so it can be apart of this project to redo the block. They need jobs. Plain and simple. The city of newport is already quite rough. And this makes it worse…

  • Judith Henault

    In response to Jamie Carter I would suggest he do a little homework. The AnC bio fiasco has been well researched and well documented by a local researcher.It is my understanding that a copy of this report was given to each alderman, the city manager and the mayor all of whom who chose to ignore it. It must be in some file somewhere. You might want to seek it out and know what our elected officials knew and when they knew it.
    Further consideration should be given to the reason for the hole in the first place. Why were these historic buildings allowed to deteriorate with no consequences to the slum landlord who went on to make millions? Again, our elected officials turned a blind eye.
    Yes, Stenger and Quiros are the the immediate cause of the mess in Newport but bad/inept local governance has had a major role as well.

    • Jamie Carter

      You misread my post. No homework is necessary Ms. Henault, I merely pointed out that what Newport needs is good jobs, good jobs that would have come from an entity such as the biotech company. Newport does not need another park or more green space. It needs jobs, jobs that are not catering to a few Canadians that may come and enjoy the lake view, but manufacturing / tech jobs that can provide residents with stable and well paying jobs.

  • bruce wilkie

    One quarter of downtown Newport looks like Syria. We will have no new hotel, no new airport terminal, no new window factory (remember?), no Bio-facility, no aircraft manufacturer. We have a hole. All false hopes promised by a pair of snake oil salesman in an area where hope in the future is a rare commodity.
    With the complicity of a state and local leadership that was either wowed by the bright lights, or plain incompetent, or involved in the scam. Due diligence by the people we elect to do just that was woefully inadequate.
    And now, just around the corner, here comes Mal-Wart.
    The final act is upon us.
    With a hole, like a needle hole in a junkies arm.

    • Neil Johnson

      There can be very, very positive outcomes on this and Newport is poised to take advantage of this. Like any bankrupt idea/plan this will come to the market value. It will got through a bankruptcy/liquidation and then good ideas based upon real world numbers can work well.

      Newport has control of their zoning, now is the time to write your future. Someone will probably pick up this lot for $500k or less, then Newport can grow as they wish.

      I’ve seen developments go through this and everyone wins and soon, I’ve also seen projects litigate/argue/town try and control everything for decades and nothing happens. If the people of Newport come together in harmony this could be an amazing blessing.

  • Anne Blake

    “We’ve been through the death of the small farm. We’ve been through the death of the railroad,” Mason said. “This is just another pebble in the road.” With all due respect Mr. Mason, I think the only people who would describe what has happened with the EB-5 Projects as a “pebble” in the road – are those who have good paying jobs or who are retired and receiving very good pensions. While it is beneficial to be positive about the future, remarks like this, to me, are a slap in the face to those individuals and families who are in desperate need of jobs. With the collapse of EB-5, their light at the end of the tunnel has gone out – at least for now.