The developer of a proposed, affordable-housing complex on Broadway has filed a notice of claim against the City of Newburgh and City Manager Michael Ciaravino, alleging both the city and city manager violated the terms of a 2012 development agreement.
“This included refusing on multiple occasions to adopt resolutions of support for the project, refusing to timely execute documents necessary for Mill Street to secure project approvals, and appointing known project opponents to various boards with jurisdiction over the project,” a notice of claim filed by Mill Street Partners on Feb. 8 states.
Mill Street Partners states it will seek compensatory and punitive damages of $31,000,000 or more. The developer planned to build 91 affordable-housing units and two retail spaces, including a 12,000-square-foot grocery store, on Broadway between Johnston and Lander streets. Mayor Judy Kennedy was unavailable for comment on the matter Tuesday.
Mill Street applied for state tax credits to fund most of the $31-million project. But, a 30-year payment in lieu of taxes (PILOT) drew intense criticism from some city residents claiming the project provides too large a tax break to the developer.
Mill Street claims it has already spent $1,000,000 pursuing the project. “Mill Street has, and continues to, suffer significant damages as a result of the city’s material misrepresentations,” the notice reads.
The developer also claims the city violated the Fair Housing Act as “such conduct has the effect and/or impact of making unavailable quality workforce housing to support the largely minority population in downtown Newburgh.”
The project has encountered numerous hurdles since the development agreement was signed by former City Manager Richard Herbek six years ago. In addition to heavy opposition to the PILOT, two residents filed a lawsuit against the city in 2014, alleging a permit for the project was granted without sufficient review. A county judge agreed.
One of the plaintiffs in the lawsuit was Stuart Sachs, who was appointed to the Newburgh Housing Authority by Ciaravino last year. That city agency is ultimately responsible for releasing a deed restriction, which stipulates that if the parcel is not used for municipal purposes it reverts back to ownership by the Newburgh Housing Authority.
Sach’s appointment to the Housing Authority at that time “was a clear conflict of interest,” Mill Street attorney David Cooper alleged in an email this month.
Last year, Mill Street asked for a resolution of support from the city for its request to the Housing Authority to release the restriction, known as a “reverter clause.” At a meeting of the Newburgh City Council in September, city Corporation Counsel Michelle Kelson explained the deed restriction would remain “a hurdle to any kind of real estate transaction” for the property until it was removed. The city council was split 3-to-3 on a vote to support its removal by the Housing Authority. One council person abstained and the resolution failed to pass.
A mediation session has been scheduled for the two parties at the end of February, Cooper said. “Mill Street is hopeful that the city will seek to work with Mill Street to resolve the reverter clause issue, recommit to supporting the project, and resume a productive public/private partnership to reinvest in a long-forgotten property in the city’s downtown,” he wrote.
By SHANTAL RILEY