JEFFERSONVILLE — The dispute between the Jeffersonville Urban Enterprise Association and a local developer has moved to the courtroom, with the future of a downtown Jeffersonville project hanging in the balance.
On Wednesday, JUEA legal counsel Larry Wilder informed the News and Tribune that on June 10, he and partner Zachary Stewart officially filed paperwork with Clark Circuit Court 2 against Alan Muncy, president of arc.
The JUEA, however, is not yet ready to pursue "full-blown adversarial litigation," according to related court documents, stating that it "reasonably believes that [Alan] Muncy's public proclamations of an interest in resolution were not merely feigned efforts to influence the jury of public opinion but were legitimate."
Taking into account the costs of such litigation, the JUEA is asking that both parties enter into mediation within 30 days of the filing.
Muncy has proposed building a multi-use development at Spring and Market streets in downtown Jeffersonville, which is at the center of the controversy.
In the meantime, the JUEA is also requesting that arc be preliminarily and permanently prohibited "from dispossessing, selling, leasing, encumbering, altering the character, beginning remediation, or beginning construction on the property" until the issue is resolved.
"We remain surprised by this whole situation and have provided the facts in a previous interview," Muncy, president of arc, told the News and Tribune. "We are hopeful that an amicable resolution can be found that allows us to continue the positive development and growth of downtown Jeffersonville."
The dispute stems from the sale of the property owned by the JUEA at the corner of Market and Spring streets, where Muncy's $3.5 million project includes apartments and retail.
But the closing of the $1 sale of the property, from the perspective of the JUEA, is not valid.
When the Jeffersonville City Council denied the issuance of an Urban Enterprise Zone tax credit for the project on May 20, the JUEA claims that the deal should have been "null and void," since the tax credit was part of a development agreement between arc and the JUEA.
"On September 18, 2018, the JUEA adopted Resolution No. 2018—R—1 approving the Development Agreement with arc for the Property in order to facilitate zone development," the court filing reads. "As stated in the Development Agreement, the purchase price to be paid by [arc] was $1.00. However, for the JUEA, the true value of the agreement was the Urban Enterprise Zone tax credit."
The lawsuit goes on to state that "under the plain language and text of the Development Agreement, [arc] expressly promised to receive the tax credit. Furthermore, [arc] agreed that the JUEA could enforce this obligation even after closing. If the Common Council refused to approve the tax credit, then the contract would be considered 'null and void.'"
With the tax credit, the JUEA stood to receive an estimated $450,000 over a 10-year period. Without it, that revenue disappears.
"The JUEA is a not-for-profit Public Benefits Corporation," according to the court filing. "It has limited funds and limited funding. The property at issue is the JUEA’s largest asset. The prospect of funding protracted litigation for not-for-profit corporation is daunting. The prospect of losing its largest asset for $1 is equally as daunting."
But Muncy contends if he is allowed to move forward on the project without the tax credits, the city of Jeffersonville would receive the full benefit of taxes; in this case, $900,000 over 10 years, plus every year after for however long the development exists.
Despite the tax credit being denied, the JUEA argues that Muncy's team "tendered its opinion that [arc] had unilateral authority to waive the tax credit provision and proceed to closing" on May 23.
Muncy, who asked for the tax credit to be included in the agreement, not the JUEA, has cited a waiver clause that states he has the right to terminate the agreement at closing should any condition not be met as evidence that he had the right to close on the property.
The JUEA, however, stated that even if only one party was required to waive the provision, it would not be arc. The language of the development agreement, they contend, stipulates that the JUEA is solely responsible for such actions.
According to the filing, if the sale is not reversed and the property is altered or sold, the JUEA will "suffer immediate and irreparable injury." If such relief is awarded, the lawsuit also requests that the costs of litigation, including attorney fees, be reimbursed.