City is sued over relocation deal Promise broken, company claims

November 12, 1993|By Joan Jacobson | Joan Jacobson,Staff Writer

A West Baltimore bottling company has sued the city, contending that it reneged on a multimillion-dollar 1985 agreement to relocate the plant and buy new equipment for it.

Custom Laboratories Inc. and its owners, Nicholas D. and Katherine S. Karavedas, are seeking $14 million in damages from the city, which the plaintiffs say refused to pay relocation costs after purchasing the property the bottling plant occupies in the 900 block of W. Baltimore St.

According to the suit, filed Oct. 21 in Baltimore Circuit Court, Housing Commissioner Daniel P. Henson III told the owners in July that the city "had decided to terminate the relocation assistance being provided to Custom Labs."

Mr. Henson's decision was an abrupt turnaround for the city, according to the suit.

The suit notes that Mr. Henson's predecessor, Robert W. Hearn, wrote in an April 13, 1992, letter to the editor of The Evening Sun: "The action by a prior administration formally committed Baltimore to all relocation payments required under federal law. While the same decision might not be made today, there is no turning back once acquisition takes place."

The letter was a response to criticism from federal auditors that the newspaper had reported.

The suit does not say why Mr. Henson decided to cut off the company from relocation assistance.

When asked this week why he did so, Mr. Henson said, "I don't think it's appropriate to comment."

George L. Russell Jr., attorney for the company, refused to comment on the lawsuit.

In 1985, the city decided to purchase the property and relocate the company to make way for future redevelopment of the 900 block, which is in the Poppleton Urban Renewal Area just west of Martin Luther King Boulevard. The city has said it would like to see residences or shops built there.

Custom Laboratories leases the property from the city and continues to operate there. The company, which bottles pharmaceutical products, plans to move to Harford County, where it has purchased land.

The suit claims that the city owes the company $8.908 million in relocation costs and seeks $14 million in damages to "realize $8.908 million after taxes."

Last year, city officials estimated that it would cost $5.5 million to move the company. The suit says the city already has paid $1.7 million toward purchase and relocation costs.

Neighborhood leaders in West Baltimore and auditors in the U.S. Department of Housing and Urban Development have been critical of the city's previous decision to pay the relocation costs.

The money would come from federal Community Development Block Grant funds, which generally are used to revitalize poor neighborhoods. Community leaders have argued it is

wasteful to spend millions of dollars to relocate a small company moving jobs to the suburbs when the neighborhood could use the money to renovate houses and commercial properties.

In March 1992, federal auditors termed the relocation costs "excessive" and warned the city that it might have to repay the money if the deal with Custom Laboratories did not create new jobs or housing, or eliminate urban blight.

Philip Hildebrandt, vice president of the Union Square Association, one of the community groups critical of the deal, said he was pleased to hear that the city has decided to stop payments to the company.

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