EagleTribune.com, North Andover, MA

December 5, 2012

Condo group to sue city over loan

Officials said promotional materials were erroneous

By Shawn Regan
sregan@eagletribune.com

---- — HAVERHILL — City Council declined to hear a condominium association’s allegation last night that it was deceived by city officials about a building improvement program over concerns the city is about to get hit with a lawsuit.

Those concerns turned out to be well-founded.

Immediately after the council cancelled the discussion, a trustee of the Wingate Street Condominium Association said the condo owners have hired a lawyer and that Mayor James Fiorentini would be served lawsuit papers as soon as today.

The association claims city officials promised a $25,000 loan for facade improvements that it would not have to repay as long as ownership of the property did not change for 10 years. In fact, trustee Tony Feliu brought with him to last night’s meeting documents bearing the city’s official seal titled “Facade Improvement Program” that states “Over a 10 year period, the deferred loan is forgiven.”

In a prior interview, Economic Development Director William Pillsbury acknowledged the condo group was told by his staff it would not have to repay the loan. However, Pillsbury said his staff was mistaken and that “promotional material” on the program was erroneous.

“It was a mistake and we regret it and I’ve apologized to Mr. Feliu,” Pillsbury said Monday. “But we have to be consistent in how we use taxpayer money. As soon as I saw what they were expecting, I said we can’t do this. They never received anything in writing that it would be a free loan. Their contract says they have to pay it back at 1 percent interest over 10 years. We thought that was a pretty good deal.”

Pillsbury said the federally subsidized facade loan program is new and that the Wingate Street condo association is the second group to use it. He said the first business to use it, Bannon’s Spa on Winter Street, paid back a comparable loan for exterior building improvements.

Feliu said he had hoped to enlist the council’s support in urging the mayor to fulfill the original terms of the loan. But prior to discussing the issue, Council President Robert Scatamacchia said City Solicitor William Cox advised that council not discuss the dispute in public.

“I have concerns that the subject matter involved could result in claims against the city,” reads Cox’s legal advisory, in part.

Cox’s letter goes to say, “city officials remain willing to continue to discuss a possible resolution of these claims with the Wingate Street Condo Trust.”

Feliu, who attended the meeting with three other condo trustees, said he learned the council would not be discussing the issue five minutes before the meeting.

“If the city is going to say those document on the program that have the city’s seal on them are not legitimate, then I guess that means residents and businesses can’t trust anything they get from the city,” Feliu said.

Feliu said his association applied for the facade program last spring and was accepted, and that the association took out a commercial loan to secure funds beyond the $25,000 limit of the city-sponsored program.

There were several delays in securing the $25,000 and the association eventually had to authorize its masonry contractor to begin work before the association received any money from the facade program, Feliu said.

“This pushed our finances to the limit — a risk we thought was acceptable considering we expected the money to be forthcoming,” Feliu said in a letter to City Council on the dispute. “June and July passed without action from the city. In August ... we learned the city had no intention of fulfilling its promise of a depreciating loan.”

“In mid September, after seven months of applications, telephone calls and e-mails, a contract was given to us. Ten years, one percent (interest), no depreciation — take it or leave it,” Feliu wrote. “The trustees, representing the interest of all unit owners, do not understand what happened. This is not how local government should work.”

Feliu said Bank of New of New England, which the city identified as a partner in the facade program, was also surprised the terms of the program were changed.

Feliu claims other homeowner groups and downtown businesses were similarly misled by the city about the facade program, including Potter Place Condo Association on Washington Street and the nearby Hans Garden restaurant. There are 36 residential units and six commercial units in the Wingate Street condominium building.