FRHA lawsuit against city dismissed

Published 7:59 pm Tuesday, September 15, 2020

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The Franklin Redevelopment and Housing authority has ended its legal battle with the city of Franklin.

In April, the FRHA filed a lawsuit against the city disputing what the authority’s attorneys termed the “erroneous” assessment of more than $400,000 in back real estate taxes, penalties and interest on three subsidized apartment complexes: Berkley Court, Pretlow Gardens and Old Town Terrace.

Southampton County Circuit Court Judge Matthew A. Glassman dismissed the suit with prejudice — meaning it cannot be re-filed — on July 23, after attorneys for the FRHA, the city and the two limited partnerships that now own the three apartment complexes reached a settlement out of court. While The Tidewater News has not yet learned the details of this settlement, Sands Anderson attorney Cynthia E. Hudson, who represented the city in this matter, said a tax payment was made to the city in an amount mutually agreed upon by all parties.

Hudson did not specify what amount was paid or who paid it — the FRHA or the partnerships — stating only that, “The City is pleased that the matter could be resolved without the expense and opportunity costs of a trial.”

Ordinarily, housing authorities in Virginia operate as tax-exempt nonprofit organizations, but in 2013, the FRHA began the process of deeding the three complexes to two limited partnerships: Berkley Court Apartments LP and Pretlow-Old Town Apartments LP.

This process, which was completed in 2014, allowed each partnership to apply for low-income housing tax credits to fund renovations. But when City Treasurer Dinah Babb learned of the ownership transfer in 2018, her office took the position that the three complexes were no longer covered under the FRHA’s tax-exempt status by virtue of their having been deeded to partnerships, and sent bills dating back to fiscal year 2015 to the FRHA’s then-executive director, Philip Page Jr.

According to correspondence between Page and the city, it appears these bills went ignored for more than six months past the Dec. 5, 2018, deadline Babb had given, before Page contested them in a June 20, 2019, response. About two months later, on Aug. 28, 2019, the FRHA’s Board of Commissioners fired Page. Franklin’s City Council then voted 4-3 in late April this year to remove each remaining member of the FRHA Board for “inefficiency and neglect of duties in office.”

In his June 20, 2019, response to Babb, Page had attached copies of letters he had received from former city manager R. Randy Martin in 2014, one concerning Pretlow-Old Town and the other, Berkley Court, in which Martin stated it was “the City’s intention that the referenced apartments, consisting of 75 units to be rehabilitated, will be exempt from all real and personal property taxes and special assessments levied by the City of Franklin … .”

In a September 2019 Tidewater News interview, Babb claimed Martin had never informed her of the change in ownership prior to his retirement in 2018, nor indicated to her his belief that said properties were still tax-exempt despite the change in ownership. Martin’s successor, City Manager Amanda Jarratt, then told the paper that to her knowledge, a city manager does not have the authority to grant tax-exempt status to any business or entity.

Shane Smith, an attorney with the firm Williams Mullen who represented the two partnerships in the suit, declined to comment on the dismissal.

The paper was unable to reach attorneys for the FRHA or Loretta Batten, interim executive director for the Authority, for comments by press time.