Here’s $69,000. I’ll Take $900,000

A developer who repeatedly broke a land deal with the city came looking for a bailout — and a chance to grab a six-figure profit that might have otherwise gone to taxpayers.

That ​“compromise” sounded good to City Hall and to a new elected official named Aaron Greenberg.

It mattered that the ​“compromise” sounded good to City Hall and to Aaron Greenberg.

City Hall’s Livable City Initiative (LCI) had the power to deny the bailout, take back the developer’s property, and put close to $1 million in the city’s treasury. Instead LCI negotiated the developer’s suggested ​“compromise.” Mayor Toni Harp signed off on it.

Aaron Greenberg is the new alder from the neighborhood, Wooster Square, where the developer’s land sits. Greenberg’s predecessor as alder, Michael Smart, called the proposed ​“compromise” an unethical ​“insider” rip-off when the developer first tried to obtain it; as the neighborhood’s then-alder he had the power to prevent it from advancing for public approval. With Greenberg’s support, and the approval of new Mayor Toni Harp, the ​“compromise” finally came before a legislative committee for a hearing at City Hall Thursday.

Greenberg, the developer, his lawyer, and an LCI official urged Greenberg’s colleagues on the Board of Alders Community Development Committee to act swiftly to vote in favor of the ​“compromise” in order to set a new precedent for how the city does business with developers who break the rules.

“I have been intimately involved in this process,” Greenberg, sitting next to the developer and his politically connected attorney, assured his colleagues on the committee at Thursday night’s hearing. ​“If this item does not move forward with this board, this building will remain vacant and unusable.” He and city officials said New Haven will set a meaningful ​“precedent” by getting $69,000.

His colleagues weren’t convinced. They tabled the matter rather than vote on it Thursday night. The matter will come back up again at the committee’s next meeting — and along with it a debate about how government should deal with developers.

A 12-Year Slog

The developer in question is named Peter Chapman. The city sold him an abandoned six-story, 30,278-square-foot warehouse at 433 Chapel St. (pictured), near the corner of Hamilton, in 2002 for $150,000, or only $5 a square foot. In return Chapman agreed to renovate the building and put 18 apartments there plus ground-floor storefronts, and not to sell the building without the city’s OK. If he failed to complete the project within 18 months, the city could take the property back.

Chapman made some renovations but ultimately failed to complete the project — not just for 18 months, but for 12 years. The building remained a drag on the neighborhood. The city never took the property back.

Chapman created a limited liability corporation (LaSaraghina LLC) and transferred the property to it in order to protect himself from lawsuits. He never told the city or got its permission, despite the requirements of the original deal. The city never took the property back.

Chapman for a while illegally housed some tenants in the building without a certificate of occupancy. LCI found out and required Chapman to kick out the tenants. The city never took the property back.

What should the city do in a situation like that? Perhaps take the building back and resell it to someone who will create apartments?

Chapman hired an influential zoning attorney, Democratic National Committee member and former state Sen. Anthony Avallone, to come up with a different idea. Chapman found a buyer for the property. He wanted to sell the property to the buyer, New York developer Jacob Feldman (operating under the corporate name MOD LLC). He wanted to get the money from the sale. Avallone convinced LCI Executive Director Erik Johnson to sign a deal in which the city would officially forgive Chapman for improperly transferring the property and allow him to sell the property.

Avallone warned said that if the city didn’t say yes, and if it tried to take back the property instead as called for under the original land disposition agreement (LDA), Chapman would likely sue. So instead of getting the property and having it turned into apartments, the city would face a potentially costly lawsuit. Better to compromise, and see the building developed, Erik Johnson subsequently agreed.

That deal needed the approval of the Board of Alders. Often the alder from a neighborhood in which a deal is proposed has initial influence on how his colleagues handle the matter. When Avallone and Johnson floated the deal last fall, the alder, Smart, decried it. He and Board President Jorge Perez refused to sign off on Avallone’s proposal that the full Board of Alders quickly OK the deal without sending it to committee for hearings.

So Chapman and Avallone waited. They didn’t have to wait long. An election was about to take place.

A New Day

In that election, Smart ran for a new position (city clerk) rather than remain as Wooster Square’s alder. Greenberg, a Yale graduate student backed by Yale’s unions, won the seat.

He said he immediately found himself in the room as a new version of the deal — a ​“compromise” — was hammered out. The compromise: If the city grants permission for Chapman to keep and sell the property, he’ll pay a ​“penalty” for the time he was in violation of the deal, beginning from when the city approved an updated version of it in 2009. Both sides agreed on a $50 fine for every day he was in violation. The deal would also allow the developer to build 22, not just 18, apartments.

Avallone, Chapman, Greenberg, and Assistant Corporation Counsel Alison Lanoue presented the ​“compromise” deal to the committee of alders at Thursday night’s hearing. In the process, they revealed two eye-popping numbers.

One: The penalties would add up to $69,000.

Two: Chapman’s buyer is paying $900,000, according to Chapman and Avallone. So Chapman would recoup six times the price he originally paid for the land. Taxpayers would recoup roughly 1/13 of the purchase price in the form of the ​“fines.”

Click here, here and here to review some of the documents presented to the committee for a vote. 

Chapman told the committee that he sank around $500,000 into the property, not counting carrying costs. He described sitting in his car at night to ward off drug dealers. He complained about how repair work on the Chapel Street overpass a block from his building caused him difficulties. He said the 2008 recession set his project back.

“My dream is unfortunately unfulfilled,” said Chapman (pictured).

Chapman also owes $5,669.70 in back taxes on the property, according to mayoral spokesman Laurence Grotheer. That money would have to be paid as part of any sale.

“We felt it was in the best interest of the city at the end of the day to see the project built,” LCI Deputy Director Frank D’Amore told the alders. ​“We vetted” the buyer, who has the wherewithal to build the 22 apartments, he assured the committee.

D’Amore was asked afterwards why the city doesn’t take back the property and sell it to the buyer, reaping the $900,000 instead.

“We talked about that,” he said. ​“He had a hardship. We’re not in the practice of penalizing people to that extent. We’re trying to clear up a muddy” case that predates his time in his position.

Asked after the meeting about the wisdom of the deal, Greenberg argued that the imposition of the $50-a-day fine sends a powerful message to developers not to break agreements with the city. (Click on the video at the top of the story to watch the conversation; he contacted the Independent moments after the original conversation to ask to amend his thoughts, leading to a second conversation, also presented in the video.)

“The city is getting a precedent that will not just apply to projects of this size, but projects that are smaller, so that we can actually collect on LDAs that have been in default for some time,” Greenberg argued.

What if the city had set a precedent by exercising its right, already in the original deal, to take back the property and collect the benefits of selling the unfinished property?

That might prompt a lawsuit, Greenberg said.

He also spoke of the need to create a business-friendly climate in new Haven.

“I suspect that would antagonize developers,” he argued. “… I think we as a city we need to create some balance between encouraging developers to come and making it a good place to do business.”

He added that the city can raise the $50 fine in the future to exercise greater leverage.

Two members of the public spoke in favor of Chapman’s proposal during Thursday night’s public hearing, which began after 9:30 p.m. (It followed an earlier three-and-a-half-hour hearing on the proposed Route 34 West development, which also ended with a committee vote to table. Click here for a previous stories on the arguments for and against the project.)

The alders on the committee appeared skeptical of the deal. They peppered Chapman’s team and city officials with questions about why the buyer wasn’t present (Lanoue said they hadn’t seen a need), about Chapman’s finances. They didn’t ask about whether the city should exercise its right to reclaim the property and conduct the sale itself.

After testimony concluded, the committee members huddled. Then committee Chair Frank Douglass declared, ​“We don’t have enough information.” The committee decided to table the matter, do some research, bring the matter back up at a future meeting.