Town, Senior Housing in Litigation Over Lease Renewal

By LAUREN S. BARR
For The Westfield Leader

WESTFIELD — The Town of Westfield and Westfield Senior Citizens Housing Corporation (WSCHC) are in litigation stemming from WSCHC’s desire to build 31 additional units and its request for a new land lease which led to a dispute about funds owed to the town.

WSCHC operates two separate buildings and corporations at 1133 and 1129 Boynton Avenue. The non-profit corporations are overseen by two boards of trustees, both of which have the same members.

According to soswestfield.org, Mayor Shelley Brindle “plans to replace the beloved senior center with luxury condos,” a charge that the mayor vehemently denied to The Westfield Leader as “a flat-out lie. They are using fear mongering and scare tactics to frighten our most vulnerable population, a group that I have made a priority of supporting in my administration.”

Save Our Seniors petition on change.org had garnered 139 signatures as of Tuesday at noon.

“The Town of Westfield has put profits over people by not renewing the lease for their affordable housing complex. This is an issue of social justice and equity for over 300 beloved seniors. Save Our Seniors Westfield is a growing bipartisan movement designed to bring awareness to the good work Westfield Senior Citizens Housing has been doing for over 45 years,” Board Treasurer John Lesher, Ph.D. said in an email to The Leader. “Our board is comprised of volunteers, many of us are seniors ourselves, who reside in Westfield and/or are experts in affordable housing, providing services for senior citizens and professional services.”

“The mayor’s recent missive, placed on the town website and shared on social media, was riddled with inaccuracies and half-truths. In addition, it neglected to mention that she is aware that we are prepared to build 31 new senior affordable housing units at the Boynton site, provided only that we receive a lease renewal. The town’s response is that we can have the renewal, but only on terms that are equivalent to the rents that would be paid by a provider of market-rate housing,” Dr. Lesher said.

“This is what we were compelled to challenge in Court,” Dr. Lesher’s email went on to say. “If we do not settle and receive the lease renewal, in a few years the Town of Westfield will be required to operate and maintain the seniors’ housing. Currently, the Boynton site is being run by Westfield Senior at no cost to taxpayers. If the lease is not renewed, Westfield taxpayers will be forced to absorb the operations and maintenance shortfalls at a cost of at least $2,000,000 per annum. Please understand—Westfield Senior Housing is a private corporation. We can build affordable senior housing anywhere. But Westfield is where our organization is based and renewing our Boynton Avenue lease on reasonable terms is prudent fiscally and socially beneficial for all Westfielders.”

The 172-unit, age-restricted building at 1133 was built in 1976, at which time the town leased the land for 50 years for $1 a year and a PILOT (Payment In Lieu of Taxes) in “an amount which shall equal 6.28 percent of the annual gross revenues of the development.” That agreement was later amended in 1986 to specify that the PILOT payment calculation include rents received, subsidy payments received, interest on surplus, revenues from laundry service and “other miscellaneous revenue” with exceptions for gifts, bequests and interest on project reserve accounts. 1133 is subsidized by the United States Department of Housing and Urban Development (HUD) and the lease contains several clauses under which the town may take possession of both the property and its improvements.

Additionally, the lease specifically requires that all board members be residents of Westfield and that Westfield seniors were to be given priority of tenancy in the building, “to the extent permitted by the applicable rules and regulations of the HFA.”

In 1993, the second building, containing 130 one-bedroom units, was built at 1129 Boynton utilizing low-income tax credits. 1129 entered into a 33-year land lease for $1 a year plus an annual service charge. The service charge was to be calculated as 6 percent of the gross revenue for the first 15 years; 20 percent of the annual taxes that would otherwise be due on the value of the land and improvements for the next six years; 40 percent of the taxes for the next six years; and 60 percent for the final three years. The taxes are to be calculated taking into account the restrictions imposed on maximum rent. While several default clauses are present in the lease, which would allow the town to take control of the building, the lease also specifically states that, “at the expiration of this Lease, the Building shall become the property of Landlord.” The lease and financial agreement were signed by Mayor Garland “Bud” Boothe and Matthew J. Sheehy, president of its General Partner, Second Westfield Senior Citizens Housing Corp, who according to tax filings also is the current board president.

Though both leases are not set to expire until 2026, 1129’s financial agreement expires 30 years after project completion, which will occur on October 31, 2025. Both the town and WSCHC acknowledge that they have been in mediation over the issue for more than three years, and in July, 1129 filed suit against the town seeking a declaratory judgment.

According to both WSCHC’s lawsuit and The Leader archives, WSCHC has been asking the town to revise one or both leases as far back as 1996. In 1998, 1999 and 2000 the lawsuit states that WSCHC requested that it receive a permanent reduction to 1 percent for the life of the agreement for 1129. In 1998 it states that it paid the 1 percent ($9,312) and that the check was cashed by the town, but no formal response to their request was received. The lawsuit further claims that it never received an invoice from the town until September of 2020 when it received an invoice totaling $679,000 for “PILOT arrearages.” It also claims that “the staged increases of the financial agreement should be declared null and void in accordance with New Jersey law.” The financial agreement states that 1129 is to submit annual financial statements to the town to determine the amount owed.

The lawsuit, along with audited financial documents for 1129, show an operating loss of over $170,000. A service charge to the town is included in 1129’s tax filing and audited financials, but the town claims that payment has not been made and the audit report marks an “accrued service charge” to the town totaling $1,713,309.

According to its tax filing and audited financials, 1133 holds loans for 1129 totaling $5.2 million at 3-percent interest and over $14 million in loans to The Village at Garwood at 0.25-percent interest. In 2011, during lease negotiations with the town, then board president Robert Conroy told The Leader, “no money from Westfield will ever be used in Garwood.”

While the suit against the town currently is in default status for failure to answer in the required time frame, as of last week, the town did file a motion to vacate the default along with an answer and counterclaim to the lawsuit. A default in Superior Court does not automatically grant judgment for or against either party in a lawsuit.

In an email exchange provided to the Court, Town Attorney Tom Jardim requested that WSCHC’s attorney, Joseph Manfredi of Manfredi & Pellechio, withdraw the default, but he refused to do so unless the town responded to their offer for settlement, which includes a lump sum payment for alleged arrearages and a new, 50-year lease for both properties.

The town’s counterclaim says that its analysis shows that 1129 owes approximately $4 million, and alleges that no money has ever been paid to the town.

The town further takes issue with the payments that have been received from 1133. While acknowledging that the town received payments, it alleged that 1133 underpaid by $476,387.40 between 2007 and 2019. The town also alleges that the loan from 1133 to 1129 is “an intra-company loan that exists when it should not, or perhaps exists solely to reduce Building II’s net revenue, and thereby its payments to the Town.”

According to the 2019 tax filings, 1133 shows $192,502 income on interest loans.

1133’s tax filing shows revenue totaling $5.1 million, with expenses totaling $3.2 million. Among those expenses are salaries and wages totaling $657,507, legal services totaling $327,126, accounting fees totaling $36,578 and investment management fees totaling $98,891. At the end of 2019, its investments totaled $23,618,985.

1129’s tax filing shows revenue totaling approximately $1.6 million with $1.8 million in expenses. Among those expenses are salaries and wages totaling $385,500, legal services totaling $58,989 and accounting fees totaling $18,493. Both buildings share an executive director.

According to its charter documents, which were amended in 2011 and are on file with the state, the board of trustees is to be comprised of 15 duly elected members, each serving a three-year term. It further states that the “trustees shall serve without compensation, but shall be reimbursed for their reasonable expenses incident to performing services for the Corporation.” The 2019 tax filings only show 14 elected board members, with the executive director filling the 15th spot.

WSCHC did not respond to questions on its board governance practices, how much 1129 has paid to the town, or potential forgiveness or lowering of the interest rate on the loan between 1133 and 1129.

A full statement from the town can be read on Page 4.

To view more stories like this, please SUBSCRIBE.

Facebook
Twitter