City government

City, Neighborhood Partners and Twin Pines exchange offers to resolve DACHA cases

By From page A1 | December 07, 2012

Another series of settlement offers have been exchanged — and rejected — by Twin Pines Cooperative Foundation, Neighborhood Partners LLC and the city of Davis. The moves add yet another chapter to the ongoing legal dispute over the Davis Area Cooperative Housing Association.

Neighborhood Partners and Twin Pines are suing the city, the city’s former redevelopment agency and DACHA for, among other things, misappropriation of public funds, breach of contract, fraudulent transfer, conspiracy and breach of governing documents.

However, because the state dissolved all redevelopment agencies in February and DACHA itself is also in the process of dissolution, the city is defending the lawsuits on its own.

In an attempt to settle the two cases before they concurrently reach court in April, Neighborhood Partners — the former developer of the housing association — offered a new deal to the city in early November asking for the sum of $875,000 that it would split approximately evenly with Twin Pines, according to the city’s legal team.

But the city officially turned down that deal and countered Wednesday with terms of its own, offering the plaintiffs two options.

The city offered either $185,000 to be split between the two organizations — and to forgive Neighborhood Partners the $15,000 it owes in legal fees to the city from a recent court ruling — or, instead, the city would make available a few-acre piece of land on Fifth Street that’s already designated for affordable housing for Neighborhood Partners to develop.

John Higginbotham, the city’s litigation attorney from Best, Best and Krieger, believes the two organizations should take the deal.

“I think they should accept it,” Higginbotham said Wednesday. “I think it’s a great offer for them because if they (take the case to trial), they’re going to get zero.”

But according to the attorney representing Twin Pines and Neighborhood Partners, Louis Gonzalez, the city’s offer isn’t enough for his clients to take the deal, especially considering they believe their case is growing stronger while they continue to take depositions leading up to the potential spring trial.

“The offer is insufficient and we’re going to reject it,” Gonzalez told The Enterprise on Thursday.

“(It’s) less than what the city has previously offered and it is insufficient given the merits of the case (that Neighborhood Partners and Twin Pines are building against the city).”

Gonzalez went on to say that he and his clients plan to send back an additional counter-offer to the city. He would not give any details, however.

But while the two sides still haven’t reached an agreement, they do appear to be making progress through active negotiations.

Both sides have said it is in their respective best interests to settle before April, if they can agree on an appropriate sum or type of compensation.

“My client has always had a desire to resolve this case,” Gonzalez said. “The city appears to be negotiating at this time and we hope to reach a resolution.”

Legal fees

Meanwhile, the city received some help on its DACHA-related legal costs last month when the state Department of Finance approved $275,000 from the city’s former redevelopment agency funds to use for attorneys’ fees.

After the state dissolved redevelopment agencies throughout California, cities were forced to transfer all agency assets to successor agencies that would oversee the wind-down of whatever the agencies had left in their coffers.

As part of that process, cities could claim obligations that they still needed to pay with former redevelopment funds, but only after receiving the state’s blessing.

Davis’ request to use the money for DACHA — which was financed, in part, with redevelopment dollars — initially was denied. But after a second application, the department approved use of the funds.

The city plans to reapply to cover further DACHA litigation expenses as well.

In March, the city released records that itemized about $400,000 in legal fees it racked up in its DACHA defense, up to the end of 2011.

David Thompson, president of Twin Pines and co-owner of Neighborhood Partners, however, has long alleged that the city has spent more than $1 million while defending itself and DACHA, which he believes essentially is wasting $1 million in public funds.

DACHA was created by the city and Neighborhood Partners in 2002, with additional start-up money from Twin Pines, as a limited-equity affordable cooperative housing association. Prospective members would pay $20,000 up-front  — and then subsequent carrying charges — to join the association and live in one of the 20 homes scattered throughout the city.

The members would receive their money back in full if they chose to leave the cooperative.

In 2005, however, the DACHA board decided to terminate its contract with Neighborhood Partners, a decision that later was deemed illegal in court.

The city, which had refinanced DACHA’s assets in 2006 and thus became the lending agency for the association, was forced to foreclose on the 20 homes in 2009 when Neighborhood Partners successfully sued the association for about $332,000.

The city has since bought the homes outright and re-purposed them as affordable rental units, now called the GAMAT Homes. Fourteen of the 20 houses are occupied and each tenant is up to date in rent, the city reports.

The average rent is $1,084 for two-bedroom units and $1,162 for three-bedroom units.

— Reach Tom Sakash at [email protected] or 530-747-8057. Follow him on Twitter at @TomSakash

Tom Sakash

Tom Sakash covers the city beat for The Davis Enterprise. Reach him at [email protected], (530) 747-8057 or @TomSakash.
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