GALVESTON — Last week, a lawsuit that sought to block construction of two mixed-income housing developments in Galveston came to conclusion, of sorts.
On Aug. 14, U.S. District Court Judge Gregg Costa officially dismissed three complaints made against the U.S. Department of Housing and Urban Development, the city of Galveston and the Galveston Housing Authority on claims of civil rights and fair housing violations.
Those claims, brought by the island-based Galveston Open Government Project and a group of plaintiffs, were dismissed with prejudice. The Open Government Project has said it intends to appeal the ruling to the Fifth U.S. Circuit Court of Appeals in New Orleans
In the meantime, local agencies are assessing how much the lswsuit cost, both in legal fees and in other costs related to the developments.
Local agency costs
The housing authority’s defense against the lawsuit, filed Dec. 3, 2013, was led by its contracted lawyer, Carla Cotropia.
Cotropia said the housing authority was charged $103,976.32 for legal fees and expenses related to the lawsuit during the nine months it was in court.
Irwin R. “Buddy” Herz, chairman of the housing authority’s board of commissioners, said the costs could have been much higher had the lawsuit required more detailed work, such as depositions or discovery.
“Although this sounds high to many people, when it comes to a major lawsuit, I’ve seen millions of dollars spent on legal fees, on both sides,” Herz said. “I wish the housing authority had not had to spend this amount, in a lawsuit that had no solid base and was more political than it was based on any great legal analogy.”
Herz said the housing authority’s legal fees were paid for with insurance funds that are tied to the construction of the developments.
Unlike the housing authority, the city of Galveston employs its own staff attorney, who defends against the lawsuit.
City spokeswoman Elizabeth Rogers said that the city’s costs were limited to filing fees. The city attorneys do not specifically track the hours they worked on city litigation, Rogers said.
Costa dismissed the case without ordering the Open Government Project to reimburse the housing authority or the city for legal costs.
It’s unclear how much the Open Government Project spent so far on the lawsuit.
The group’s attorney, Shari Goldsberry, said in an email that she received no payment from the Open Government Project for her services.
“GOGP has paid staff expenses and case expenses (filing fees, service fees, etc.) but there have been no fees paid for my time or the time of my co-counsel Lori Laird,” Goldsberry wrote. “In terms of hours of my time, I quite frankly stopped looking at it after awhile because it was so much.”
Goldsberry said that during three and a half years, she had spent more than 1,000 hours on work related to housing issues in Galveston.
That time would likely increase if the Open Government Project appeals.
Plea for funding
David Stanowski, president of the Open Government Project, could not be reached for comment regarding his group’s intent to appeal, however, a statement on the organization’s website asked supporters to donate money for that purpose.
“As the case dragged on and on, we were forced to do most of the research and preparation that will be necessary for the appeal, just to finish the case,” the statement said. “This means that the good news is that we need far less money for the appeal than we first thought, because much of the work has already been paid for.
“The bad news is that the government’s tactics were successful in wasting a lot of our money, so we still need some more, at this time. This money will pay our lawyers to take our research and preparation and draft the briefs for the appeal.”
It’s unclear how much the Open Government Project has spent on its advocacy against public housing.
The Open Government Project is a registered 501(c)(3) nonprofit organization, and is required to file publicly accessible tax returns with the Internal Revenue Service. Generally, the tax returns outline a group’s charitable spending, as well as its expenses for administration. However, groups that receive less than $50,000 a year are only required to submit a less-detailed returns, called Form 990-N, that gives only the most basic information about the organization.
The Open Government Project has submitted the less detailed forms to the IRS every year since 2010.
The Open Government Project asked the district court to order defendants to reimburse the organization for expenses because it had been forced to abandon its role as a government watchdog and divert its resources into fighting the housing developments, although it never cited an exact number in court filings.
The lawsuit had effects other than legal costs on the price of the mixed-income housing projects, according to officials. The halt in construction caused by the lawsuit increased the cost of one of the housing developments.
Before the lawsuit was filed, the housing authority received cost estimates from its chosen contractor, Sullivan Brothers Builders, for the developments at sites of the former Cedar Terrace apartment complex.
The company originally estimated $19.3 million for constructing Cedar Terrace, said Deyna Sims-Hobdy, the attorney hired by the housing authority to help it negotiate the construction contracts.
The lawsuit prevented the authority and McCormack Baron Salazar, the private developer that it is partnering with to construct the developments, from closing the deal that would guarantee that price, however.
Because of the lawsuit, the state attorney general’s office would not approve tax-exempt bonds meant to finance the construction. Without the financing, an agreement could not be reached with the construction company.
The housing authority ultimately reached an agreement with the Texas General Land Office to use uncommitted disaster recovery funds instead of bonds to finance the project, but during the time it took to reach that agreement, the contractors were left in a state of limbo.
In February, Sullivan told the housing authority that it could no longer guarantee its original estimate, and submitted a new one for $20 million.
Sims-Hobdy said there was never a signed agreement for the original price of Cedar Terrace.
“It is important to understand that construction costs are greatly impacted by events in the economy, and timing is everything in bidding and prices,” Sims-Hobdy said. “The construction environment had been heating up during the months when they were attempting to hold on to the original bid.”
The development on the Magnolia Homes site, which was long scheduled to begin later than Cedar Terrace site, did not receive an original estimate from Sullivan Brothers. The construction cost on that development will be $26.7 million.
Construction of the developments is expected to begin later this year.
Contact reporter John Wayne Ferguson at 409-683-5226 or firstname.lastname@example.org. Follow him on Twitter, @johhnwferguson.