Fitchburg Housing Saga Secures Boston Developer | Legal, financing woes plague elderly and low-income project
Fran Colantonio and Robert Hill both want the same thing: To get a public housing project in Fitchburg back on track after nearly two and a half years of stalled construction.
But Colantonio, president of Holliston-based contractor Colantonio Inc., and Hill, executive director of the Fitchburg Housing Authority, have been at odds ever since funding for the project dried up. And that disagreement led to a lawsuit that’s been plodding its way through court for the past two years.
But now both parties seem optimistic that with the addition of a reputable Boston developer, construction could begin again soon.
Money Trouble
The saga began in late 2006 when a 10-story elderly housing complex that sits within a block of Fitchburg’s Main Street was suffering from a low occupancy rate.
In an effort to improve the attractiveness of the property, Hill and the five-member board of directors for the Fitchburg Housing Authority agreed to pursue a $7.5 million renovation.
The upgrade was to include new activity areas, a communal kitchen and dining area, a wellness center, and computer center, along with all new heating, cooling and security systems. The 96-unit complex would be split between elderly housing and low-income subsidized housing.
But financing proved hard to come by, even as initial demolition on the project commenced. Colantonio Inc. eventually filed suit in December 2007 seeking $1.2 million from the housing authority, alleging that he and other contractors had been misled as to whether financing for the project was in fact secured.
Over the past two years as the suit has rolled on, Hill has been trying to find new financing for the project. With the tax credit market souring soon after the suit was filed, Hill said it was difficult to look for new investors.
Last year, the housing authority executed a public bidding process for a new development partner for the project. Boston-based WinnDevelopment, which manages real estate projects across the state, executed a contract with the housing authority in December 2009.
Winn has worked for more than 30 years developing properties, but recently has focused on turning around “troubled properties.” It’s made major inroads in Worcester, acquiring the Chevalier Furniture building in the city’s Canal District, with plans to convert the brick structure into housing.
Lawrence Curtis, president and managing partner for Winn, confirmed in an e-mail to the Worcester Business Journal that Winn has signed on to work with the project. He expects rehabilitation to begin on the property in spring 2010.
“We are evaluating the funding gaps left by the previous development,” Curtis said. “We look forward to shortly confirming the funding shortfall and securing the additional resources to meet it.”
Hill said recently that Winn is leading the project, but he expects the new financing agreement to use a combination of state and federal tax credits, along with investments by various home subsidy programs.
Colantonio said he’s happy to see that Winn has signed on.
He called Winn one of the “most reputable” in the business and said he’s cautiously optimistic he will get the nod to begin construction again sometime soon.
Meanwhile lawyers for both sides have filed a joint motion to put the suit on hold given the newest developments.
Legal Wrangling
According to documents related to the lawsuit, the case boils down to a he-said, she-said, with Colantonio asserting that the housing authority claimed it had the money for the project. The housing authority, meanwhile, has stated it was upfront about the lack of secure financing.
The housing authority’s planned renovation officially began in September 2006, when the project was put out to bid. Colantonio Inc. of Holliston was selected and soon signed a contract. Housing authority representatives held off on signing the contract, however.
According to an affidavit filed as part of a later lawsuit, Hill said he was unwilling to sign the contract because a complete funding mechanism had not yet been put in place for the project.
Two months after the initial bid was awarded, Hill sent a letter to Colantonio informing the contractor that funding sources had still not been finalized. Hill assured Colantonio that they were working diligently to finalize the monetary aspects.
Initially, the housing authority and a nonprofit consultant focused on elderly housing, CenterPoint Foundation Inc. of Quincy, were hoping to use a combination of state and federal housing subsidies. Included in that pool of money were reimbursements from the federal Department of Housing and Urban Development.
Soon before construction began, Colantonio, Hill and seven contractors that had signed on to the project met to discuss the project in mid-May 2007.
Hill stated in court documents that he never indicated that funding had been finalized.
“At no time did I represent that the balance of the financial package had closed or that all of the funding had been finally committed,” Hill said in an affidavit.
Colantonio remembers the meeting a different way.
“During that meeting Robert Hill … assured all of us in the room that financing for the project in the amount of $7,538,000 was confirmed and available for construction,” Colantonio and others said in court documents.
While the full financing package was not finalized, the housing authority took out a loan from the former Fitchburg Savings Bank, now Rollstone Bank & Trust, to pay for the demolition. The housing authority then issued a notice for Colantonio to proceed on construction. Demolition work began and within weeks materials were delivered to the site. Colantonio estimated that about $1.8 million worth of work and materials were spent on the project.
In mid-September 2007, however, the housing authority learned that HUD had rejected a request for funding. According to information from Colantonio’s lawyers, HUD officials offered a $322-per-unit, per-month reimbursement for the project. Housing authority officials, however, asked for a $547-per-unit, per-month in assistance. The highest reimbursement rate in the country that HUD offered at the time was $485 in New York, according to an e-mail included in court documents from a staffer for U.S. Rep. John Olver.
Colantonio said in an interview this month he was surprised to learn funding dried up.
“We never would have signed a contract and begun the work if money wasn’t there,” he said. “We specifically asked the question at the preconstruction meeting and we were assured as a group that funding was in place.”
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