By TED CARTER
A growing stack of legal bills seems not to have dimmed Ridgeland City Council’s enthusiasm for cutting way back on multi-family rental units within the city.
Neither has the prospect for new costs that may arise from court losses that could include economic damages liability and liability for violations of the Fair Housing Act as well as pledges for City-issued bonds.
Nor has the possibility that the campaign against multi-family rentals could diminish the taxable value of the complexes created second thoughts.
If successful, however, aldermen would transform the Ridgeland of the future to one dominated by single-family homes and mixed-use developments where villa-style homes are interspersed among retail, entertainment and recreational amenities. Rental apartments would become far fewer, having been forced to obey new density limits that trump the higher density limits allowed over the decades in which developers built them.
With the phase-out, zoning will allow new high-end apartments that are part of mixed-use developments, said Community Development Director Alan Hart said, but they won’t be “a traditional apartment-complex arrangement.”
The tradeoff in fighting off challenges to Ridgeland’s strategy is that paying the legal freight means cutting somewhere else, said Mayor Gene McGee last week, a day after the council rejected a tax increase of 1.11 mills. “Some projects folks want may have to be put off,” he said.
The extra millage would have generated around $500,000 toward erasing $1.5 million in red ink from a 2016 budget that projects revenues of $22.2 million and expenses of $23.7 million.
McGee said the money from the extra 1.11 mills would have fallen short of paying off the costs of defending more than a dozen lawsuits apartment complexes have filed over a new zoning ordinance designed to significantly trim their numbers.
“The litigation is much more than the tax increase was going to bring in,” McGee said.
Even without the litigation the budget would have needed some increased spending, he added.
With the suits moving forward in state and federal courts, the council must go into the general fund to pay to defend against the suits, according to the mayor.
Some concern was voiced by Alderman Ken Heard in an interview last week, though Heard did not indicate he wants to back off the litigation with apartment complex owners. However, he did reject the tax increase proposed by the council’s budget committee and conceded that the council has plenty to figure out in adopting the new budget that begins Oct. 1.
The growing legal bills add to the difficulty, he said, and suggested the fiscal 2016 budget won’t be the only one the legal costs will make more difficult.
“I just recognize it as having the potential for being an awful lot of money,” Heard said.
Another dissenter against a tax increase, Alderman Chuck Gautier, said he thinks the budget has things “the City could do without,” the Associated Press reported.
Gautier did not mention legal costs but his comment came after an executive session on “litigation” and “economic development.”
The fees to outside law firms are included in the budgets of the various departments using their services. The Community Development Department is implementing the 200-plus page zoning ordinance enacted in early 2014. Hence, its budget grew by more than $900,000 in fiscal 2015 over fiscal 2014. For the new fiscal year, its proposed budget of $1.57 million is about $500,000 higher than its fiscal 2014 budget.
The new zoning ordinance launched Ridgeland on a strategy of curtailing rental apartments through applying density limits and other development conditions retroactively.
For instance, negotiations between the City Council and Gables apartment complex early in the last decade gave the 200-unit complex a green light to build at slightly more than 14.2 units an acre. Now Ridgeland is insisting the County Line Road’s rental development cut back to a cap of 10 units an acre. Earlier this year, the Community Development Department refused a request from owners of the complex to classify the Gables as a “Class A Nonconformity.”
The Class A Nonconformity classification is the highest grade the zoning ordinance allows nonconforming rental complexes and would have bought the Gables some time in its standoff with Ridgeland. A drop to Class B or C could mean that an order for demolition of some units – and dislocation of residents – is imminent.
The Gables is among more than a dozen Ridgeland apartment complexes that have sued Ridgeland in Circuit Court over the new demands the 2014 zoning ordinance put on them. The complexes argue that Mississippi law recognizes that continuation of non-conforming uses is a well-established and substantial right.
The Mississippi Supreme Court ruled precisely that in May in deciding a Richland mobile home park’s nonconforming-use status did not prevent it from filling vacant lots. The ruling overturned Madison-Rankin Circuit Judge John H. Emfinger’s 2013 decision in favor of Richland.
A similar and more recent case in Pearl gave Emfinger a second crack at the non-conforming rights issue. This time he ruled for Grove Acres Mobile Home Community in its challenge to a ban Pearl put on putting mobile homes on empty lots.
Pearl’s actions violated the park owner’s “constitutional right to enjoy its property,” Emfinger said.
Pearl can’t prevent “the lawful continuation of a nonconforming use,” he said in concluding his ruling.
Except for federal suits claiming housing discrimination and broken bond collateral pledges, the Ridgeland suits have landed in Emfinger’s court.
Lawyers for some of the apartment complexes say Emfinger showed his cards in the Pearl case and would be surprised if he gives a different interpretation of rights that accompany a non-conforming use.
Lawyers for the various rental complexes say Ridgeland’s zoning ordinance has kept the owners who want to sell from selling and others that must refinance their loans from refinancing.
“All of these have refinancing coming up,” said Jackson lawyer Michael Cory Jr., who represents some of the complexes, and who thinks Ridgeland could be on the hook for money damages if it loses in court. If the apartments can’t “arrange long-term refinancing and (interest) rates go up… the City could be held responsible for that,” Cory said.
One complex, the 260-unit Baymeadows, has been unable to rent units in two of its buildings that have been vacant awaiting renovations. Ridgeland has not issued permits for the renovations.
Lawyers for Baymeadows charge in a federal suit that Ridgeland’s bid to phase out current apartment complexes seeks to rid the city of affordable housing occupied primarily by blacks and Hispanics.
Complex owners unable to do a timely refinancing may have to pay a default interest rate higher than a re-fi would bring, lawyers say.
Investors in another apartment complex, Northbrook, say in a federal suit that Ridgeland wants to force demolition of the very buildings the City used to secure $7.9 million in debt to pay for renovating the 180-unit subsidized-rent complex. The investors, CAP IV Ridgeland LLC, say the City in issuing the bonds pledged not to interfere with the bond’s collateral.
Just what the bond agreement specified and the sorts of pledges included in it are disputed throughout the suit and in Ridgeland’s response to it. Ridgeland’s specially hired land-use lawyer, Kelly Simpkins of Wells Marble & Hurst, denies nearly all claims made by CAP IV Ridgeland LLC other than acknowledging Ridgeland issued the bonds in 1999.
The standoff with Ridgeland can make the complexes difficult to market o prospective buyers, according to lawyers involved in the land-use challenges. “Who wants to buy a complex that is in the middle of a zoning battle” and deemed out of conformity?” one lawyer asked. “It doesn’t take a banker or lawyer to realize you don’t really want to buy an apartment complex in Ridgeland.”
Ridgeland’s land-use transformation is designed to be achieved over a long period. As time goes on and uncertainty over the future of the complexes sets in, the apartment buildings operate a zoning defect that can lower their taxable valuation, lawyers say.
The diminished income from the complexes can become a chief consideration when appraisers set valuations on the apartments. Those lower appraisals can be expected to be used in property assessment appeals.
The result: Fewer property tax dollars to Ridgeland, according to lawyers.