WILLMAR -- Mayor Les Heitke warned City Council members Monday night the city could face an expensive and lengthy lawsuit after the council voted against signing a document that would pass a state grant through to the developer of the Westwind low-income housing project in southwest Willmar.
A motion to authorize an official, pro-bably eit-her the mayor or city ad-ministrator, to sign the document was defeated 4-2. Council members voting against the motion were Ron Christianson, Tim Johnson, Steve Ahmann and Jim Dokken. Voting in favor were Bruce DeBlieck and Denis Anderson. Council members Doug Reese and Rick Fagerlie were absent.
The financing package for the $5.4 million Westwind rental twin-home project includes a $350,000 community development block grant from the Minnesota Department of Employment and Economic Development. The city had earlier signed an agreement with DEED to pass the grant through to the developer, Southwest Minnesota Housing Partnership of Slayton, explained Rich Goodemann, partnership executive director.
Goodemann appeared before the council to request a city signature on the document for the DEED grant. He was also present to explain the developer's new financing package, funding mainly by federal stimulus money. A previous financing package relying on federal tax credits fell through during the national banking crisis of the past two years.
Goodemann had been asked by the council to return to the council when the financing had been finalized.
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After the council voted, Heitke asked City Attorney Rich Ronning where project stands.
At this point, said Ronning, the agreement isn't approved for signature by the city. He said it will be a question of whether or not Southwest goes ahead with closing the project's other financing documents, which was tentatively scheduled for March 18.
"It's something that Mr. Goodemann and his people have to decide how they want to handle,'' said Ronning.
Heitke said council members and many citizens either support or oppose the Westwind project. But he said council members have a fiduciary responsibility to protect the city from lawsuits.
"I think this really exposes the city to a major lawsuit on housing discrimination,'' Heitke said, referring to an earlier threatened lawsuit by Southwest after half the council walked out of a meeting two years ago in an attempt to block proposed Westwind street construction.
"That's what we have been advised by our city attorney and by two attorneys from the League of Minnesota Cities,'' Heitke said. "Now, if we are faced with a lawsuit, that can go on for a long time and be horribly expensive. They gave us case study that lawsuits in this area can go in the multi-million dollars. Our insurance won't carry us up that far.''
The mayor questioned whether council members have thought through that part of the process.
"The grounds for that lawsuit are there, by comments made by council members and walkouts on a council meeting which interfered with due process. Now we have to get ready for that possibly,'' the mayor said.
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Christianson said he did not favor signing the agreement. He said justification for Westwind was a housing study done in April 2006. Now, he said, things have changed. He said the city has a glut of housing and a glut of rental housing.
"This is a project for people who can't afford their monthly payments,'' he said. People will be moving out of private rental housing and into this project, hurting the private sector, he said.
The 28 rental twin-homes -- two housing units to a structure -- will be built in an area that is zoned for development of twin-homes. Four units will be reserved for homeless families who meet the federal definition of homeless.
The project received the go-ahead in May 2008 after Mayor Les Heitke broke a 4-4 council tie in favor of allowing construction of the twin-homes and streets and utilities.
The project was opposed by neighboring single-family homeowners who said the project would negatively affect their property values.
Southwest began site preparation and earthmoving in August 2008. Construction of streets and utilities was completed in late 2009, and building permits for the units were obtained at the end of 2009.
