BRADENTON, Fla. - The Louisiana State Bond Commission moved closer to settling a two-year-old federal lawsuit that underscores residential neighborhoods' resistance to housing for low-income and previously homeless disabled people.
After a more than five-year delay, the SBC on Tuesday approved the issuance of $3.4 million of multifamily housing revenue bonds to further such a New Orleans development at the center of the federal complaint.
The commission, however, decided against approving an offer to settle its portion of the lawsuit with the Department of Justice without seeing it in writing.
The DOJ opened a housing discrimination investigation in 2010, then filed a complaint and claim for damages in August 2012 against New Orleans and the SBC alleging they violated the Fair Housing and the Americans with Disabilities acts.
The violations stemmed from delays in city zoning approvals and the bond financing for the controversial $6.6 million redevelopment of a former 102-bed nursing home on Esplanade Avenue in New Orleans that was shut down after Hurricane Katrina in 2005.
Gulf Coast Housing Partnership and other nonprofit agencies planned to turn the nursing home into 40 apartments with half designated for low-income housing and half for homeless persons with disabilities.
The redevelopment, however, was stymied because of a lengthy controversy involving the city's approval process for such projects, a 2009 moratorium on SBC bond approvals for such projects pending a market study on low-income housing saturation in New Orleans, and opposition from area residents worried about crime.
The Bond Commission lifted the moratorium Jan. 16, after the panel went into private session with attorneys.
A trial in the case was set for Feb. 24, but the judge presiding over the matter told city and Bond Commission attorneys to attempt to negotiate a settlement, attorney Patricia Wilton with the Louisiana Attorney General's Office told the SBC Tuesday.
In a verbal report, she said the SBC's proposed agreement would cover three years and require the commission to follow federal housing requirements for the low income and disabled. The commission also would have to agree not to enact a new moratorium on affordable housing projects in New Orleans, to notify the DOJ if one is contemplated, and to review written federal housing regulations.
Calling it a "once in a lifetime deal" and a minimal agreement that would end the lawsuit without the SBC paying a civil penalty, Wilton said it would allow the commission to operate as necessary and give up nothing.
"You only give up the right to discriminate, and you don't do that anyway," she said.
When asked what New Orleans had negotiated in a separate settlement, Wilton said she was not privy to the most current details but believed the city could have to pay up to a $10,000 civil penalty, approve additional affordable housing, modify the process for zoning regulations changes, and undergo training.
State Treasurer John Kennedy, who chairs the commission, asked if it was likely the settlement would go forward if the SBC authorized the Esplanade project. Wilton said she believed it would, but that no settlement likely would be reached if it was voted down.
She also recommended that the commission approve the settlement because the "record as a whole in this case is not likely to be 100% successful," nor would the SBC walk away without some liability.
Before terms of the current SBC settlement were negotiated, Wilton said the DOJ wanted the commission to pay a portion of the damages sought, which were around $2.1 million, and wanted advance notices about housing projects of this nature along with written reasons if some were not approved.
The DOJ also wanted the right to pre-approve affordable housing projects statewide and to limit the criteria considered by the SBC in evaluating proposals.
"They wanted to be in your business day in and day out, and of course that was completely unacceptable," she said.
When Kennedy asked if the SBC would be required to approve such projects in the future without questioning costs, Wilton said the proposed settlement requires that the commission evaluate projects consistent with established parameters.
Senator Ed Murray, D-New Orleans, called the settlement one-sided, and pointed out that the SBC had no written agreement to review. He also said the presiding judge administratively closed the case on Feb. 6 on the belief that a compromise settlement was expected to be reached. Wilton said the court accepted the SBC's settlement proposal in principle, and typically there is 60 days to approve final terms.
"Don't you think it's important that we all see what we're agreeing to?" asked Kennedy, adding that he believed the law was followed by the state and the bond commission. "But if we're being asked to do something different we need to see that, and what the commission is effectively agreeing to."
Wilton said the written agreement would be presented for the SBC to review at its Feb. 20 meeting.
During consideration of the Esplanade project, Kennedy questioned its construction costs. "Our analysis shows it costs $1.23 million, and $800,000 is the profit," he said, asking how a tax-exempt sponsor could make a profit.
Kathy Laborde, president of Gulf Coast Housing Partnership, said tax-exempt refers to the nonprofit organization's status, and that payments are fees for services.
Several speakers complained that the development was going in an area not zoned for it, and that variances were improperly granted by the city. A suit is pending in state court challenging the city's ultimate approval of the project.
Michele Braden, past president of the Esplanade Ridge Civic Association, said people fear a spike in crime because the neighborhood is "being inundated by nonprofits" buying property for such housing because of meager prices.
Kennedy also complained about the high cost of building the 450-square-foot apartments, and likened their size to that of a hospital room or trailers provided by the Federal Emergency Management Agency for temporary housing after Katrina.
"We need to help the homeless, to help as many as we can," he said, adding that the Esplanade apartments would cost $140-a-square-foot while the average single family home price in the parish costs $143-a-square-foot.
"How many homeless folks can we help for $6.6 million, and here we're going to help 20. It's hard for me to defend," he said.
The project's costs are in line with similar projects, according to commission staff.
Some SBC members wanted to delay action on the housing project until they saw the detailed lawsuit settlement. However, Commissioner of Administration Kristy Nichols pointed out that the Esplanade was recommended by staff because it met the SBC's technical qualifications.
Even if the development is approved the commission can still reject the DOJ settlement, she said.
The commission voted 7-to-4 to approve the long-delayed project.
During its meeting Tuesday, the SBC also took bids to competitively price $496.4 million of state general obligation bonds to finance 605 public projects across Louisiana. JPMorgan was awarded $347.1 million of tax-exempt GOs at a true interest cost of 3.58%. Wells Fargo won $149.3 million of taxable GOs with a true interest cost of 1.49%.
The bonds are rated AA by Fitch Ratings and Standard & Poor's, and Aa2 by Moody's Investors Service.
The Bond Commission also approved pricing up to $225 million of state highway improvement revenue bonds between Feb. 18 and 20 to fund improvements on rural state roads that are ineligible for federal highway funding. The bonds are rated AA-minus by Fitch and S&P, and Aa3 by Moody's.
Lamont Financial Services Corp. is financial advisor. Citi is the book-runner.
The syndicate also includes Loop Capital Markets, Morgan Stanley & Co., Raymond James & Associates Inc., and Stephens Inc.
Foley & Judell LLP is bond counsel. Breazeale, Sachse & Wilson LLP is counsel to the underwriters.
