Developer sues city over housing limits

August 13, 2005|By GREGORY T. SIMMONS

A project that would build 432 apartments in Hagerstown's North End and new rules placing limits on housing in and around city limits are at the center of a $25 million lawsuit facing the City of Hagerstown.

"There's a whole lot of money at stake, so it's not something that surprises me," City Councilman Lewis C. Metzner said Thursday.

City officials were aware that land developers were not happy with the restrictions, and some discussions over possible litigation had taken place before the lawsuit was filed last month in Washington County Circuit Court.


The Hagerstown City Attorney's office, Urner, Nairn & Boyer LLC, will not be handling the case, City Attorney John Urner said. The case has been forwarded to a private insurance carrier for the city.

The lawsuit revolves around the Cortland Manor apartments, which would build 432 apartments in 36 buildings on 55.3 acres off Leitersburg Pike, northeast of the intersection with Eastern Boulevard and Potomac Avenue, which becomes Leitersburg Pike near the project.

According to the lawsuit, the city only has allowed nine of the 36 buildings to be built even though developers believed they would be able to go forward with the entire project. Because of the terms on an $18.5 million loan, the project is in jeopardy of defaulting on the loan.

The city's unfair enforcement of new building limits resulting from sewer system problems are partly to blame for the problems, according to the lawsuit.

The land is owned by two separate limited liability corporations, Cortpark LLC and Cortpark II LLC, according to the lawsuit. According to city information, the developer is Ben Shaool Construction, of Hagerstown.

The administrative process to develop the land began more than two years ago, but by January of this year, the developers had received site plan approval from the City Planning Commission and applied for all 36 building permits, according to the lawsuit.

Soon after, the landowners settled on an $18.5 million loan for the project, the lawsuit says. By the time the lawsuit was filed, the developers had spent $727,579 in permit application fees with the city.

As the project was taking shape, the city was facing serious challenges with its sewer treatment system. After years of continued problems, including spills of wastewater that had not been fully treated and other environmental permit violations, the city was forced into an agreement with the Maryland Department of the Environment.

That agreement, known as the consent judgment, is legally binding and in part required the city to limit the amount of new sewage that would enter the city's treatment system, effectively limiting the number of new buildings.

In February, the city adopted an interim plan, and this week adopted a more permanent plan called the Sewer Capacity Allocation Program. The plans differentiated between "existing" and "new" projects, ones that had received a certain amount of administrative approval, and ones that had not.

Scott Schubel, who is representing the plaintiffs, said his clients are asking the court for one of two things: Require the city to issue the remaining permits so the developers can finish the job or pay his clients up to $25 million.

Schubel said his clients had every reason to believe they would be able to finish the project, and even under the consent judgment, the city still should allow the project because it had approval before the terms of the consent judgment took effect.

"It seems a little unfair," Schubel said.

City Administrator Bruce Zimmerman said there are no immediate changes planned for the sewer capacity program.

Metzner said that because the lawsuit is being handled by an insurance company, the city's finances will not be affected immediately. But if the insurance company does end up paying some amount of money, "it would probably have a very negative effect on our insurance premiums."

Metzner also said the administration was in a bind over the sewer issue, and it was pretty clear that someone would test this in court because of the amount of money invested in local development, and the limits' effect on those developments.

"We've done everything we can to be fair," Metzner said.

He also said he believed the case might serve an important purpose by testing the city's sewer restriction policy. If the court does not uphold the policy, the city would be told how to fix it.

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