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The Minot City Council voted unanimously Monday after meeting in executive session to move forward with filing litigation for breach of contract against 16th Crossing, Inc., to recover nearly $6 million in federal and City dollars expended on a housing project.
The project is adjacent to 55th Street Southeast. In December 2017, the City terminated its agreement with the developer, alleging that the developer failed to meet project obligations. Despite requesting more time in early 2018, the developer has not made significant progress towards completing the project or offered a viable proposal to bring the project into compliance.
“As we’ve said before, the City cannot ignore the developer’s failure to comply with the terms of this agreement,” said City Manager Tom Barry. “The City has a responsibility to recover the federal and City funding used on this project, and that requires moving forward with litigation.”
As a recipient of Community Development Block Grant-Disaster Recovery funds, the City is required by the U.S. Department of Housing and Urban Development (HUD) to proactively assure that all investments of these federal dollars comply with the agreements made for their expenditure, especially the National Objective on which use of the funds is based. In this case, the National Objective is providing housing for Low/Moderate Income (LMI) people. Failure to assure developer compliance with the National Objective puts the City at risk for HUD sanctions.
In 2013, the City entered into an agreement with the developer to expend $5 million in CDBG-DR funds to provide public infrastructure improvements to a development located in southeast Minot. The City also spent an additional $951,193.99 of City funds on public infrastructure for this development. In exchange, the developer was to construct 178 townhomes and provide 350 manufactured homes on properties located in the 55th Crossing West neighborhood by July 2015. A minimum of 51% of the townhomes and mobile homes were to be set aside and offered at a price affordable for LMI buyers, and once occupied remain LMI for three years.
The developer has provided varying reports on the project’s status; the most common report is that 34 townhouses are completed and occupied, with 15 occupied by LMI households, and 19 occupied by non-LMI households (44% LMI), far below the 51% requirement. The developer has also failed to provide required quarterly reports to the City for the past several months.