BRADENTON, Fla. — The Department of Justice plans to revive its federal housing discrimination lawsuit against the Louisiana State Bond Commission after commissioners rejected a settlement.
Federal prosecutors filed a motion Monday with the U. S. District Court for the Eastern District of Louisiana seeking to reopen the case.
The request was filed four days after the bond commission voted to reject a settlement during its March 20 meeting.
Prosecutors asked that a hearing be held April 16, and want all 14 members of the Bond Commission to attend the proceeding to discuss various issues, including whether settlement options are "fully exhausted."
U.S. District Judge Martin Feldman has also been asked to set various deadlines, including a trial date.
The city of New Orleans, which was a defendant in the case along with the commission, has independently approved and executed a separate 12-page settlement, federal prosecutors said in a filing March 21.
Prosecutors asked the court to approve the city's settlement without assessing any financial penalties or legal costs.
The city's settlement requires that New Orleans fund 350 new affordable housing units, or beds, for homeless persons with disabilities over the next three years.
It also obliges city officials to undergo specialty training about the Fair Housing Act and the Americans with Disabilities Act, as well as to report certain housing issues to the DOJ.
New Orleans Mayor Mitch Landrieu could not be reached for comment.
The Department of Justice suit, filed in 2012, had been administratively closed earlier this year when attorneys for the city and the State Bond Commission worked with Feldman on terms of a settlement to resolve all claims, according to court documents.
Patricia Wilton with the Louisiana Attorney General's Office, who represents the bond commission in the case, urged commission members March 20 to accept the settlement. She said Attorney General James "Buddy" Caldwell also agreed that it should be approved.
The DOJ opened the housing discrimination investigation in 2010, then filed a complaint and claim for damages in August 2012 against New Orleans and the bond commission, alleging they violated the Fair Housing and the Americans with Disabilities acts.
The violations stemmed from delays in city zoning approvals for a 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 was stymied because of a lengthy controversy involving the city's approval process for such projects.
The project was further delayed when the State Bond Commission in 2009 placed a moratorium on approving bond financing for such projects pending a market study on low-income housing saturation in New Orleans.
After more than a five-year delay, the SBC in February approved the issuance of $3.4 million of multifamily housing revenue bonds to support the Esplanade project and heard a verbal report on the proposed DOJ settlement.
The commission decided to withhold a decision on the legal settlement, however, until seeing the agreement in writing. They did not like what they saw, and voted 9-to-3 March 20 to reject the settlement.
Wilton said the settlement agreement would resolve the lawsuit and waive a $3 million penalty. She also said much of the settlement amounted to "form over substance."
It would have required SBC members and state officials to review housing laws, to notify the DOJ if a moratorium on affordable housing projects is contemplated, and to follow the law.
State Treasurer John Kennedy, chairman of the bond commission, called the proposal unconstitutional.
"I think you ought to go try this lawsuit," he told Wilton.
"We didn't do anything wrong," he said.
"The settlement would have required unprecedented federal oversight of Louisiana housing issues," Kennedy said in a release the day after the bond commission voted it down. "It would have also put the Bond Commission and taxpayers at a disadvantage every time the Bond Commission didn't approve a housing project, regardless of the project's merits or lack thereof."
Bond commission member Kristy Nichols, who is Gov. Bobby Jindal's commissioner of administration, said she agreed with Kennedy and wondered why the SBC should sign a document agreeing to follow the law "and submit ourselves to additional oversight when we originally followed the law."
Bond commission members also questioned promises that New Orleans agreed to undertake as a party to the settlement, including funding 350 affordable housing units.
"The city doesn't have the money and they are going to come to the state [to fund the new units]," Kennedy said in an interview with The Bond Buyer on Tuesday. "And the state doesn't have the money."
He would not comment further on New Orleans' agreement to settle the suit except to say that decision was up to the mayor.
Kennedy reiterated that he doesn't believe the bond commission did anything wrong; the proposed settlement was "pretty intrusive," he said.
"They wanted the governor to sit and watch a training film," he said. "I thought that was inappropriate."
The issue is about who "runs housing policies in Louisiana," said Kennedy, noting that the state's decisions have been consistent with federal law.
"There's a proper role for the federal government to play, and a proper role for the state to play," he said. "As the state treasurer, I thought it would be a mistake to enter into this settlement."
It would also breach the legal principle called comity in which states or courts from different jurisdictions mutually recognize each other's legislative, executive, and judicial acts, said Kennedy, who is an attorney.
The state, he said, will go to trial if a settlement ultimately cannot be negotiated.
"I don't know if we will win or lose, but sometimes you have to take a stand on principle," Kennedy said. "I'd rather lose a cause that's right, than settle and agree to something that's wrong."
