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Larry Altman - Daily Breeze

Mike Herrera says he might not have accepted his job in 2006 as executive director of the Boys & Girls Club of the South Bay in Harbor City had he known about the financial mess that would quickly envelope him.

Before his arrival, the organization had built a sizable debt that exploded in 2008 when he received a notice from the state telling him he owed $2 million to pay off a $1.4 million government loan he knew nothing about.

“They were telling me, ‘You get 30 days to pay up,’ ” Herrera said.

He went to public officials to ask for help, but no one offered any. Former state Sen. Jenny Oropeza, who allegedly had told previous club officials at the time the loan was granted that it would one day be forgiven, had died of cancer. Nothing was in writing.

“There was no way to prove that,” Herrera said. “She was not there and her assistant passed away.”

The situation looked bleak until a month ago, when Assemblyman Al Muratsuchi stepped in. Herrera, who had never talked openly about the financial situation that he feared would shut down the organization that serves 4,500 children, finally leaked word of the problems on Monday. His office issued a press release announcing that the club planned to honor the assemblyman at a dinner next week for spearheading the effort to save the club that nobody knew needed to be saved.

“I wasn’t trying to keep it a secret,” Herrera said. “My board knew.”

Herrera said he feared talking about the financial issues would scare away foundations that provide grants to the club if they feared it was about to shut down.

“They think you are going to go under and (they) are not going to put good money after bad,” Herrera said.

According to Muratsuchi’s office, the Boys & Girls Club of the South Bay took out a $1.4 million loan from the state Child Care Facilities Financing Program in 2002 to build its Harbor City complex, an 11,000-square-foot child care and development facility with a gym, a computer lab, game room and offices.

Under former Executive Director Hector Cepeda, the facility at 1220 W. 256th St. opened to great fanfare in 2003. But two years later, Muratsuchi’s office said, no payments had been made on the loan because of poor management. By then, the Technology, Trade and Commerce Agency, which administered the CCFFP loan, no longer existed, and the CCFFP was run by the state Department of Housing and Community Development.

The loan apparently was caught in the shuffle and forgotten. Herrera never received any bills and didn’t know he should be looking for any. In 2008, he received a telephone call and a visit saying it was time to pay up.

“At a certain point, Hector didn’t pay it. I’m not sure why,” Herrera said. “When I got a notice about it, I was ‘Wow. I don’t know if we can pay this.’ I was very, very stressed out. I thought, ‘Oh no, they are going to close us down.’ I went to two or three government officials and they said they could not do anything about it.”

Cepeda, who in 2001 ran against Janice Hahn for a seat on the Los Angeles City Council and lost, could not be reached for comment.

Herrera said he already was trying to pay off a large debt accumulated before his arrival, and the outstanding loan continued to loom. His predecessor had failed to pay county taxes for five years, he said.

“We’ve been cutting costs without hurting the kids’ programs,” Herrera said, adding he might have been able to create jobs without the debt, but instead took on volunteers to clean and help with programs.

“I had dark hair when I started here,” he said.

Herrera said he worked to renegotiate the outstanding loan, but was told the Housing and Community Development Department did not have the authority to modify the terms.

In February, Muratsuchi wrote a bill to give the department that authority. Muratsuchi spokeswoman Melissa Uribe said the bill worked its way through the Legislature, but was held at the Senate Appropriations Committee while the Housing and Community Development department determined it did indeed have the authority to change the loan terms and renegotiate with the Boys & Girls Club.

About a month ago, Herrera said he emerged with a deal that will enable the organization to pay off the loan over 58 years at zero percent interest. Once the principal is paid, the $600,000 in interest and penalties will be forgiven, he said.

“Fixing this thing has been a real challenge, but it’s been fixed,” he said. “We’re at the point where we can start planning on the future. We’d love to have a Boys & Girls Club in the city of Torrance.”

The organization, meanwhile, will honor Muratsuchi at its Fiesta! Dinner Gala Oct. 24 at the Crowne Plaza Hotel. Herrera said that although the legislation ultimately wasn’t necessary, the attention helped to get the loan renegotiated.

“I’m so grateful to the guy because, honestly, he saved the club,” Herrera said. “Maybe we might have not gone under, but he guaranteed we will be here for a long time. We’re alive. Right now we’re staying alive.”