Lawsuit won't derail local apartment project

Missoula-based Sparrow Group is pushing forward with its plans to build Depot Place, a 40-unit, $3.9 million affordable senior housing project near downtown Kalispell.

That’s despite a lawsuit challenging the process the Montana Board of Housing used to award affordable housing tax credits to Depot Place and five projects like it around the state in April.

“We’re proceeding,” said Alex Burkhalter, who is overseeing the Kalispell affordable senior housing project for Sparrow Group.

Communities for Veterans, in Sarasota, Fla., filed a lawsuit in District Court in Helena after its request for some of the tax credits available this year was denied.

The Florida group aims to renovate 11 historic buildings on Fort Harrison in Helena into affordable housing for homeless and disabled veterans.

The pending lawsuit challenges Montana’s process for awarding federal tax credits, arguing it is arbitrary, prone to favoritism and does not afford due process to challenge decisions, said Craig Taylor, the group’s president.

“It’s not something we want to do. It’s expensive and time-consuming, confrontational. You don’t make friends this way, and that’s not what we’re about, but we were left with no other recourse,” Taylor said.

“The outcome we would hope for is the Board of Housing would allocate tax credits to the project and we would proceed with our project as presented to the board.”

More than a dozen groups applied for the tax credits this year.

In April, tax credits were awarded for housing projects in Kalispell, Bozeman, Shelby, Great Falls, Browning and Sidney, according to the Helena Independent Record.

Five of the developers awarded tax credits told the court last week that they already have spent money on their developments and that reversing or delaying the tax credit allotments would create major costs for them or derail their projects entirely, the Helena newspaper reported.

“The premise is that the whole process is flawed and we lost a lot of money, too,” Taylor said. “If they have chosen to go forward and spend money in face of the lawsuit, I don’t want to sound too judgmental, but that may be a questionable act on their part.”

The Montana Department of Commerce, which oversees the Board of Housing, is asking District Court Judge James P. Reynolds to issue summary judgment and dismiss the Florida group’s lawsuit.

Marissa Kozel, director of communications, declined to comment on pending litigation but said that successful applicants remain free to reserve their tax credits and proceed with their housing projects.

“Essentially, they are moving forward as planned because the tax credits were already allocated, and they will continue to do so unless something else occurs in the court,” Kozel said.

Sparrow Group is continuing to move ahead despite the “added element of risk.”

The group recently applied for a building permit for Depot Place and on Tuesday cleared Kalispell’s Architectural Review Committee.

The three-story, 40-unit apartment building would be built at the northwest corner of Third Avenue East North and East Center Street, across the railroad tracks from the Sherwin-Williams store.

“I’d agree with [Department of Commerce], I think the process is sound,” Burkhalter said. “We’ve been both successful in our applications and turned down. They’re a limited resource and there’s just not enough to fund everybody. It’s very frustrating when you lose.”

If Sparrow Group didn’t proceed with Depot Place, it likely wouldn’t be able to meet the tight deadlines that come with the tax credits and stand to lose them or see them greatly reduced.

“We have to have the building placed in service by the end of next year,” Burkhalter said. “We anticipate coming in well before that, but if we placed everything on hold until the lawsuit is figured out, we wouldn’t make it.”

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com.