Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NOVI, MI-To avoid a $69-million judgment against the city, the city council has decided to settle a case with developers Sandstone Associates by giving away park land. The city will hold a public hearing Monday night at 7:30 p.m. at the civic center to discuss the problem.

Mayor Richard Clark and members of the council say their hands are tied, and wish they could fix the situation without giving away public land.

However, the cost of the lawsuit, compounding at 12% interest, is too much. Residents would have to pay $237 more a year in taxes, on average, if the city had to charge them to pay the debt.

“No resident in the community did anything to deserve this situation,” saidthe council in a letter to the residents. “We detest that this matter evolved to the present circumstances.”

The case started six years ago, when Sandstone was developing 100,000 sf ofhousing, commercial and related retail uses along the new Novi Road, just south of 13 Mile. The company accused the city of not developing the road intime, resulting in the project’s downfall. Sandstone sued and won in Oakland County Circuit Court in January 1999, and a judgment of $40 million was rendered against the city. That award was later amended to be about $33 million.

However, in September of that year, the court issued an additional judgmentawarding interest, attorney fees and costs of more than $20 million. With 12% interest accruing since 1995, the cost of the judgment is now $69 million, the council says.

The city is appealing the case, but doesn’t think it has a chance to win, andit’s possible even if a new trial is held, the court could award even moredamages. As the appeal would be heard, the interest would still accumulate.Novi has about $20 million in insurance through the Michigan Municipal League and the Michigan Municipal Risk Management Authority to cover such lawsuits, but the two companies dispute their responsibility.

City officials entered into settlement talks in February 2001, and have worked out a deal, which includes:

* The city would allow an additional 70,000 sf of development on a site at 13 Mile and Novi roads.

* 75 acres of a 555-acre city park land abutting 12 Mile Road will be conveyed to Sandstone for primarily multi-family and commercial use.

* An additional 20 acres of park land may be optioned by the company if insurance proceeds are not received within two years of the settlement.

* Novi will clean up the property portions that were former orchards, and now have levels of arsenic and other pesticides on the grounds, for $75,000,by Jan. 1, 2003.

* Sandstone will receive $9.5 million of the first of the insuranceproceeds. The city will retain half of the proceeds in excess of the $9.5 million, which will be put in a park development fund.

Much of the new council was elected after the lawsuit judgment was handed down, mostly because residents were angry with the city for putting the finances in danger.

“We are committed to cleaning up this mess that was given to us,” said the council. “We feel the community is looking to us to resolve the litigate and related huge financial vulnerability.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.