By Lev D. Zilbermints
As was reported in the April 20, April 14 and March 23, 2023 issues of “Local Talk”: the City of Newark, its Municipal Council and certain other parties were sued by the developer, Fairmount Senior Genesis, Housing Urban Renewal Partnership, LLC, Genesis Fairmount Partners, LLC and Genesis Central Ave Partners. The cause of the lawsuit was that the City and its Municipal Council allegedly failed to live up to their side of the agreement and were engaged in unfair play and political shenanigans.
In this, Part III b of the article, “Local Talk” sheds more light on what happened.
Politics may be why things went wrong
What happened? Why was everything going smoothly, and then went wrong? The answer in part, could be because of politics. As was written in the previous installment of this article, the make-up of the Municipal Council changed. Mayor Cory Booker left to take up a seat in the United States Senate. He was briefly succeeded as mayor by then Municipal Council President Luis Quintana. After elections were held, Ras Baraka, the son of Amiri Baraka Sr., was elected mayor of Newark. The new mayor had his own opinion on what should be done with the project that the City and the developer were working on.
The political makeup of the City Council changed as well. Because of this, the developer started running into all kinds of delays and roadblocks. Court papers say as much.
According to court papers, copies of Municipal Council resolutions and LIHTC documents were attached to paperwork filed in court. These papers are called Exhibits and run the alphabet from Exhibit A to Z. For example, “Exhibit L” denotes “true and correct copies of the referenced LIHTC application documents and lists of all applicants for 2011, 2012, 2013.”
Other resolutions of the Municipal Council can be found under “Exhibit M”, Exhibit N”. Simply put, the City of Newark, via its Municipal Council, passed resolutions approving the project. However, it needs to be noted that some resolutions are dated 2013. One resolution is dated July 23, 2013, the other, November 6, 2013. This means that they were passed when Cory Booker and a different City Council were in power. Once the political makeup changed, all kinds of shady things started happening.
City makes pledges of financial assistance, then leaves agreement
According to court papers, “Further, to meet the requirement of the LIHTC financing and to induce Plaintiff to develop both Properties, the City pledged, among other things, financial assistance in the form of certain federal HOME Investment Partnership Program and grant monies to offset the redevelopment and environmental remediation costs of that undertaking. …
“The City refused to acknowledge however that it would honor its HOME funding commitments under the HOME Agreement.
“The funding commitment of $1.875 million in HOME funds was required in order to submit an application to NJHMFA.”
This reads as though the City says one thing and does something else entirely.
Because the City would not make a commitment it would honor, the developer, referred to in court papers as Plaintiffs, could not do anything. Even the court papers, with their dry language, show the enormity of the dealings by the City.
According to court papers, “Plaintiffs could not submit an application for funding to the NJHMFA, purporting to have HOME funds based on a commitment the City did not intend to honor.”
“Plaintiff Fairmount accordingly pressed the City to advise them by July 22, 2015, before the contemplated July 24, 2015 submission deadline to NJMHMFA, whether the City would fund the $1,875,000 pursuant to the 2013 HOME Agreement.
“The City further advised that it was de-committing federal HOME funds committed to the Fairmount Properties in 2013.
“Although the City realized that this action would impact Plaintiffs’ NJHMFA application, the City nevertheless purported to terminate Plaintiffs’ HOME Funds, representing to Plaintiffs that HUD had de-obligated certain of the City’s HOME funds in conjunction with its 2013 HOME Final Rule on July 24, 2013.”
According to the City, the foregoing was “applicable to all HOME funded projects to which HOME funds are committed on or after August 23, 2013.
“Plaintiffs’ funds, however, were committed prior to this date pursuant to the terms of the HOME Agreement.”
In simple English, what all this means is that the developer was trying to submit an application for HOME funds, but could not. The City refused to honor its earlier commitment. Questions arise about how much of what the City told the developer was true. For example, did Housing and Urban Development (HUD) “de-obligated certain of the City’s HOME funds?”
According to court papers, “The City advised on July 21, 2015 that it would not supply Plaintiff Fairmount with those funds pursuant to the HOME Agreement. The City further advised that it was de-committing federal HOME funds committed to the Fairmount Properties in 2013.”
Contractual Obligation
The developer tried to get the City to honor its promises, agreements and contracts. According to court papers, “In any event, the City’s obligation to fund $1,875,000 under the HOME Agreement was a contractual obligation to which it was bound. Despite HUD’s purported recapture of the referenced funding, Defendant City has secured HOME funding or other funding for other projects. Thus, Defendant City should have met its funding obligations to Plaintiff Fairmount pursuant to the HOME Agreement here.”
“In spite of its obligations under the HOME Agreement, the City by its July 21, 2015 letter to Plaintiff Fairmount, wrongfully rescinded its promise to fund pursuant to the HOME Agreement.”
Here we see the developer accusing the City of failing to meet its contractual obligations under the HOME Agreement. The developer, or plaintiff, is used to prompt action that it sees in business and legal circles. Thus, the plaintiff is not used to unusual dealings with the City of Newark. Court papers say as much.
What loss of HOME funding means
According to court papers, “The loss of HOME funding for the Fairmount Properties makes redevelopment of that site economically infeasible, as the NJHMFA will not award tax credits without the demonstration of a feasible budget. Accordingly, the loss of the $1.8 million ion HOME Funds leaves a hole in that budget, precluding Plaintiff Fairmount from obtaining additional funding through the NJHMFA.
“Indeed, despite additional equity that Plaintiff Fairmount expended to prepare the affordable housing development at the Fairmount Properties, Plaintiff Fairmount was compelled to not submit its NJHMFA application for funding as a result of the City’s action set in its July 21, 2015 letter.”
Simply put, the City was aware that the loss of HOME funding meant the Fairmount Properties could not be redeveloped. If the developer, also known as Plaintiff Fairmount, walked away, the City could get someone else. Hence, it looks like the City is doing everything to get the developer to walk away. At that point, the City will do whatever it wants with Fairmount Properties. However, the developer decided to fight back.
Next time: Developer alleges more suspicious actions by the City of Newark
