City, developer locked in limbo

No resolution seems near in dispute over profits from building bought with block grant

September 28, 2006|By Jill Rosen | Jill Rosen,SUN REPORTER

Last spring, Baltimore officials pressured a local developer, threatening to blackball her from city contracts until she repaid at least some of the $1.3 million she made selling a building she promised to convert into low-income housing.

But months later, Baltimore has yet to see a dime from Savannah Development Corp. President BettyJean Murphy. And it is unclear when - or if - any money will be returned to the city's ever-needy community block grant program.

City officials and Murphy cannot agree on the developer's obligations to return the million-dollar profit she made by selling the property bought in 1995 with a $368,000 public grant. And judging from statements issued by each side yesterday, they also cannot agree on the state of their negotiations.

"The agency's negotiations with Savannah ... have reached an impasse," Housing department spokesman David Tillman said in a statement yesterday, hours after Murphy's crisis management public relations firm Redzone arranged for her attorney to issue more positive-sounding remarks.

"Savannah has been negotiating in good faith with the city since May," Kenneth Frank said. "[W]e believe we are close to finalizing an agreement."

The conflict dates to 1995, when the city awarded Murphy a $368,000 community development block grant to buy the old Calvert School at 10 W. Chase St. in Mount Vernon and convert it into affordable apartments. But the school sat virtually untouched for 10 years, and Murphy sold it in December for $1.3 million to Washington-area condominium developers.

Those developers, in turn, have recently put the building back on the market for double what they paid for it - $2.6 million.

When city housing officials belatedly learned last spring that Murphy had sold the building, they insisted she repay the $368,000 grant. She balked.

Officials also wanted the additional $932,000 she made on the sale, but sloppy language in the city contract left them without much legal leverage, city officials have said.

Deputy City Commissioner of Development Christopher Shea said last spring that until he got the money, he would block Murphy from city contracts - a substantive threat, considering that she has built her career on public sector work.

If withholding contracts did not work, Tillman said, the city would sue Murphy.

A lawsuit has yet to happen and it is unclear how seriously other city departments took Shea's contract threat.

Baltimore Development Corp. President M.J. "Jay" Brodie said yesterday that although the BDC did not choose Murphy recently to develop two sites in Pigtown, it had nothing to do with the dispute, which he called "something between her and the housing department."

Frank told The Sun last spring that Murphy spent "many hundreds of thousands of dollars" attempting to convert the old school, and because of that she might not be obligated to repay the original $368,000 grant, let alone the rest of the money.

Housing officials gave Murphy a deadline of June 1 to prove how she spent the money. But on that date, Tillman told The Sun that Shea had granted Murphy more time to locate receipts.

Neither the city nor Murphy's representatives will discuss how many receipts Murphy has produced or how much they total.

Tillman and Shea stressed that with the federal allocation of community block grant dollars shrinking all the time, the city would have no problem finding a good cause that could use the money Murphy made from the building.

They said in May that if she turned over the money soon, it could be in use by an affordable-housing program by the end of this year. It is unclear now when those dollars might be recycled - or if they will be.

"It's a significant amount of money that could absolutely be in use," Tillman said in May. "We have every intention of making sure [the housing programs] get it as soon as possible."

Both parties said yesterday that they are considering arbitration and bringing in a mediator.

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