Developer sues Montgomery Township over fallout from decertification of SFO

August 13, 2008|By JENNIFER FITCH

MERCERSBURG, Pa. -- A lawsuit filed recently in federal court claims that Montgomery Township, Pa., officials paid interest payments on a private developer's loan for 11 months, something that the developer says cost the township $3,000 to $6,000 a month.

A Harrisburg, Pa., attorney representing the municipality acknowledged the payments and said they were made to help Winter Greenes Joint Ventures LLC while both sides dealt with the fallout of a decertified sewage enforcement officer.

Repercussions following the decertification of that sewage enforcement officer, Jack Reed, are at the heart of the lawsuit. From it, Winter Greenes hopes to resolve the housing development's future or collect damages from Oliver Homes due to what they perceive to be a breach of the home builder's $2.6 million contract.

"We're the damaged party here. We had a dream and our dream was crushed," said Jeff Piper, one of plantiffs involved with the development of Winter Greenes, which is not far from the entrance of Whitetail Mountain Resort.


Oliver Homes left the project while the sewage problems were being hashed out, creating the biggest financial hit for the developers of Winter Greenes.

"Oliver Homes doesn't buy lots to build corn on. (The delay) cost us in excess of $3 million," Piper said.

Piper and his business partner, Hanno Rittner, said that the 36-acre property went under contract in November 2004, followed by on-site testing by Reed three months later. All but two of the 23 planned lots were OK'd for individual septic mounds.

The plans for 2,000- to 3,000-square-foot upscale homes received final land development approval from the township supervisors in April 2005, Piper and Rittner said. That approval was subject to the pending approval by the Pennsylvania Department of Environmental Protection, and that came from the DEP a few weeks later, they said.

The developer demolished an existing house, entered into a contract with Oliver Homes, cleared grub and did grading for the land, and watched as Oliver Homes finished building a $649,000 model home.

"Realistically, it was 98 percent complete," Piper said.

That's when rumors began to circulate regarding an issue with Reed's certification. Winter Greenes received a formal notice in November 2006 saying that Reed had been decertified, Piper and Rittner said.

"They questioned everything he did throughout the county," Rittner said.

The township rehired its former SEO, Jonathan Piper, and sent him out to retest several properties, including Winter Greenes. His findings brought development of the site to a halt.

"Over half of our lots were unsuitable for on-lot septic systems," Jeff Piper said.

What followed was a series of meetings with the developer, township, DEP and representatives of Whitetail. The resort has its own sewer plant determined to be suitable to serve the new homes. Also, Rittner and Piper said the DEP told them that they might be able to create their own septic system with a new, small sewage treatment plant on the property.

The DEP found that one spot was satisfactory for a private treatment facility, which the developer decided was a viable option. Winter Greenes incurred an additional $65,000 debt to engineer that facility, according to Piper and Rittner.

The pair said the township, which does not have a public sewer system in that area, preferred the sewer tap option with Whitetail. However, the developer had concerns about the $750,000 price tag and Whitetail's desire to have control over the number of units.

"They claimed their plant was not suited for the number of lots we (now) needed to make it economically feasible," Rittner said.

In the midst of the negotiations process, which extended through the end of 2007, Winter Greenes Joint Venture LLC lost its contract with Oliver Homes and watched the values of land drop as the housing market hemorrhaged.

Then, in early 2008, Piper and Rittner learned the township was claiming sovereign immunity to distance itself from the problems.

"The township, after leading us to believe we had a remedy, ... they say you know what, we're claiming immunity," Piper said.

The township has sovereign immunity under the tort claims act, according to the municipality's attorney in this matter, David Francis.

"Not withstanding that sovereign immunity, the township still wants to resolve this issue in a way that's in the best interest of the community," Francis said. The community interest and a desire to keep Winter Greenes financially viable contributed to the decision to make debt service payments for those 11 months, he said.

Piper said that they filed the lawsuit in order "to be put back whole." Remedies as he sees it are a combination of the township paying Whitetail for the sewer tap and lines, the township reimbursing Winter Greenes for added debt for things like engineering, and permission for the construction of additional units.

Francis, who requested the case be moved from county court to federal court, argued that Winter Greenes was not the only entity hurt by this process.

"The township is also a victim of the negligence of Jack Reed, the former SEO. They've incurred a significant expense also," Francis said.

On Monday and Tuesday, a phone number remained "busy" at the home of Reed, who was fined for allegedly signing off on tests not conducted properly.

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