Dispute may cost builder city work

Officials hope to recoup $1.3 million from developer

Dispute could cost developer city work

May 16, 2006|By JILL ROSEN | JILL ROSEN,SUN REPORTER

A decade ago, a developer came to the city of Baltimore with a most unusual request. Buy me a building, she said, and I'll turn it into housing for the poor.

And the city answered her with a most unusual reply: Sure.

Together they signed a most unusual contract, one that gave the developer the building outright and left the city with no means to get it back should the developer not do what she promised.

Perhaps not surprisingly, this story ends badly, with the building standing empty, the developer pocketing a nearly $1 million profit from selling it and the city hoping against hope that it can get its money back.

"As I read the agreement from 11 years ago, I thought, `This is nice. How do I get a deal like this?'" says Chris Shea, Baltimore's deputy city commissioner for development, who has been tagged with the task of persuading the reluctant developer to pay up.

"I don't have a lot of leverage," he says. "I think a case could be made that I don't have any leverage."

Unless that leverage includes blocking the Baltimore-based developer, Savannah Development Corp. President BettyJean Murphy, from doing further business with the city. Because municipal deals with Baltimore make up the bulk of Savannah's portfolio, that could be the ultimate, if not the only, weapon in Shea's arsenal.

BettyJean Murphy, who used a $368,000 community development block grant in 1995 to buy an old Mount Vernon school building, sold it in December for $1.3 million to developers with plans for plush condos. The grant came from Baltimore's pool of increasingly scarce federal dollars intended for affordable housing.

Though Murphy is legally obligated to repay the city the original $368,000, nearly six months later she has yet to write that check. In fact, the city found out about the sale of the old Calvert School at 10 W. Chase St. only when a local business reporter called to ask about it.

As for the $932,000 difference, Murphy believes that's hers. Because city officials feel otherwise, they're at something of a stand-off.

Shea has given the developer until June 1 to prove, as she says, that she has already spent at least that much money in her fruitless efforts to convert the building into apartments.

"Whatever is legally owed to them, Savannah will pay back," says Kenneth Frank, the developer's attorney, who spoke on Murphy's behalf. And as he sees it, that might be a sum even less than the $368,000 original grant.

"It's a business deal," Frank says. "One side wants to spend as little as they can, and the other side wants to get as much as they can." And the side he sees BettyJean Murphy on? "We're on both sides."

Through the years, Murphy has won city land deals and claimed tax subsidies worth millions, building her career on a foundation of public projects.

She has carved out a reputation for pulling off quality affordable housing developments, spending more to instill them with comforts that other builders might have left out.

"At a time when people would take the cheapest crap you could build and stuff people into them, BettyJean was the only person in this entire metropolitan area that argued that affordable housing had to be good housing, that poor people were worth it," says Charlie Duff, executive director of the Midtown Development Corp.

"Her work earned her a lot of respect from people like me. She's done projects, she's taken risks and pulled things off - it's not like she's Jack Abramoff or something."

That said, Duff thinks Murphy should give back the money.

But public opinion does not appear to be high on Murphy's priority list.

She stood firm and unfazed last spring when outcry erupted over her plan to build condos on city land overlooking Canton Waterfront Park, a project that would have left the Korean War Memorial there in its shadow.

She might be the only developer in town who keeps a crisis management public relations team on retainer.

"I am a major, major supporter of minority business - but I am also a major, major supporter of what is fair," says Rep. Elijah E. Cummings, adding that this situation will only make it harder for him to win federal dollars for the city. Murphy is among the city's few black female developers.

"I think if one would ask any taxpayer in Baltimore if they think this situation is fair, their answer would probably be no," Cummings said.

When Shea found out that Murphy had sold the property, he called her and told her, in so many words, "Send me a check."

He said she told him, "It's more complicated than that," that she spent a lot of money to try to develop the building.

He asked her to send him the proof by June 1.

According to Frank, Savannah has been scurrying for months, digging to find canceled checks and bills, evidence of what he calls the "many hundreds of thousands of dollars" Murphy spent to get the project off the ground.

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