Cliff Buchan
News Editor

A settlement of a lawsuit filed by Duffy Development/HSI will net credits and cash of $150,000 and a commitment by the city of Forest Lake to fully address affordable housing in its comprehensive plan.

The agreement, finalized on Wednesday, Dec. 27, brings to a close more than a year of a legal fight over the city's denial of a conditional use permit and subdivision for an affordable housing town home project. The project, now under construction on the former site of Memorial Hospital on SE 11th Ave., was the subject of multiple lawsuits.

The suit against the city came on Dec. 5, 2005 after the city council voted on Nov. 21, 2005 to deny the Duffy-HSI conditional use permit request. Duffy is partnering with Human Services, Inc. of Washington County to build 38 units of affordable housing on the former hospital campus.

The suit charged the city with acting in a manner that was "arbitrary, capricious and unreasonable, (and) constituted unlawful discrimination" in violation of state laws.

City Administrator Chip Robinson said he was relieved to have the settlement in place in the final hours of 2006.

Under the settlement, the city has agreed to waive $100,000 in sewer and water availability area charges to assist Duffy and HSI in providing affordable housing options for Forest Lake residents.

The agreement also calls for the city to pay Duffy and HSI an additional $50,000. The amount will be paid by the city's insurer, the League of Minnesota Cities Insurance Trust.

A third key element to the settlement involves the city's comprehensive plan.

The city has agreed to commence and complete a review of its current comprehensive plan and zoning and subdivision ordinances regarding affordable housing, Robinson said. The review will involve the existing comprehensive plan with amendments possible this spring, the administrator said.

The review will also target the new comprehensive plan that the city will prepare this year. During the process, Robinson said the city will review its zoning and subdivision ordinances and propose amendments that affirmatively encourage affordable housing goals identified by the Metropolitan Council.

Covenant issue

One of the factors in the city's initial denial of the CUP was the existence of restrictive covenants placed on a portion of the hospital campus in August of 1960 when a citizen group that worked to site a hospital here acquired land from the Swanson family.

The covenants restricted future use of the land to medical purposes.

But those covenants were determined no longer be valid by way of a legal opinion prepared by an attorney specializing in real estate law for legal counsel representing the city.

The covenants were ruled invalid under a state 30 year law for such restrictions and the state Marketable Title Act, known as the "40 Year Law" that provides that "interests and restrictions on property more than 40 years old are invalid and may be disregarded."

The covenants were also the basis of a separate lawsuit filed by a citizens group in the neighborhood of the campus that objected to how the city and the former Memorial Hospital District Board of Governors performed during the land transfer process. The suit accused both of lack of oversight.

The Forest Lake hospital closed in 1998 after the new regional Fairview facility opened in Wyoming. Three years earlier Fairview entered into a 10-year lease with the Memorial Hospital board that gave Fairview the option of buying the land for $1 in 2005.

Residents who formed the Forest Lake Community Association argued based on the Fairview lease that Fairview had no legal right to agree to transfer ownership of the property through purchase agreements.

Prior to gaining actual ownership of the land and property, Fairview signed purchase agreements to sell land to Duffy/HSI and the building and some land for the Lakes International Language Academy public charter school.

The FLCA suit has also been settled.

The project

Work began this fall on the first buildings of what is now the Forest Ridge Town Homes.

The project will consist of two and three-bedroom family style town homes with rents ranging from $750 to $850 a month.

The full complex is expected to be completed by next fall, with some of the units ready for occupancy next summer.

Two of the units will be accessible for persons with physical disabilities and seven units will be supported by HSI for homeless single-parent families where the parent is in recovery from chemical dependency.

In addition to standard tenant screening, income limits will insure that these affordable home are available for working families with annual incomes that range between $22,000 and $50,000.

The settlement agreement does not involve any waiver of city fees to a separate four-unit development on the southeast corner of the campus that Duffy plans to build and sell.

Robinson said the city, as stipulated in the settlement, has already acted as a conduit for the disbursement of some $225,000 of Metropolitan Council grant monies to Duffy/HSI.

"The parties are looking forward to the construction of a premier town home development that provides affordable housing options for the variety of citizens who contribute to the community of Forest Lake," the two parties said in a press released issued Dec. 27.

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