Developers Sue State Over Affordable Housing

SACRAMENTO (CN) - Three property developers claim in court that California's Department of Finance is trying to "uproot" an affordable-housing project in San Marcos by finding it ineligible for millions of dollars of tax credits.

Southern California Housing Resource and Development LLC, Creekside Land Holding Co. LP, and Residences at Creekside Housing Partners LP want an injunction against the Department of Finance and its Director Ana Matosantos. The developers claim the state violated constitutional protections for contracts tied to the 98-unit Creekside housing development.

San Marcos, in North San Diego County, is plagued by nightmare traffic and overdevelopment, but has little affordable housing.

Gov. Jerry Brown last year signed into law two budget implementation bills known as ABx1 26/27 which "effected substantial changes to redevelopment law," and which the Department of Finance used to abrogate the developers' rights to millions more in low-income housing tax credits, according to the complaint.

The developers claim that the contracts, and roughly $60 million of housing bonds set aside by the San Marcos Redevelopment Agency in 2010, are enforceable agreements even under the new law.

"Expedited relief in petitioners' favor is critical because without it petitioners will lose, among other things, low income housing tax credits that form an essential part of the financing needed to create the affordable housing units in question," the Superior Court complaint states.

"Expedited relief is also warranted to avoid other irreparable injury to one petitioner's [Southern California Housing Resource and Development] relationship with and reputation before the California Tax Credit Allocation Committee ('TCAC'), a state agency that is critical to that petitioner's business."

The developers say the Department of Finance's position would "undermine" a Superior Court judgment from 1990, which mandated a special fund from tax revenue to remedy the "critical shortage" of low-income housing in San Marcos.

"Petitioners' project, which DOF would unlawfully uproot, is an essential component in San Marcos' long-standing efforts to comply with those judgments," the complaint states.

In May 2011, the San Marcos Redevelopment Agency authorized a $28 million loan to support the Creekside Project, the developers say. The $13 million already drawn on that loan "constitutes a lien on the property," and the property will be "essentially worthless" unless the developers receive $17 million more in tax credits, according to the complaint.

The developers say that though the Department of Finance does not dispute that the 1990 judgments are "'enforceable obligations,'" the agency claimed that a development agreement and owner participation agreement for Creekside was noncompliant, even though it was approved "long before" AB 26/27 was enacted.

The developers say the agreement was treated as an "inconsequential detail that can be ignored in DOF's headlong rush to vacuum whatever funds it can find."

The developers are represented by Robert Doty, with Cox, Castle & Nicholson of San Francisco.

Neither the law firm nor the Department of Finance immediately responded to requests for comment.

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