Durham Public Works: Most failed-development problems cleared up

Apr. 15, 2014 @ 08:09 PM

So far the city’s only had to spend $35,000 to $40,000 of its own money to secure the completion of streets and other infrastructure in the “failed and struggling developments” left behind by 2008’s market crash.

That’s a small amount compared to the $8½ million or so in private-sector spending that’s gone into street and drainage work in 30 or so subdivisions the crash left in danger of going unfinished, Public Works Department and other city officials say.

But an estimated $5 million in work in 23 neighborhoods remains, and a pending court case is likely to play a big role in determining how much of that bill lands on the public’s shoulders.

The case affects two unfinished subdivisions, Stone Hill Estates and Ravenstone, that between them account for about half of the estimated completion costs that remain, said Robert Joyner, Public Works’ manager of development review.

Still, City Council members are pleased that so much work in the affected neighborhoods has been completed without a public outlay.

“This is nice progress,” Councilman Steve Schewel said, adding that the post-crash failed-development issue had given the council “an interesting view of the economy,” albeit a not particularly enjoyable one.

The issue surfaced as a major concern for city officials in 2009, when it became apparent that a good number of developers who’d started projects before the crash either had or would go bust without finishing their infrastructure.

That left Public Works and the city attorney’s office to pick up the pieces, first by calling in the completion insurance they had had required developers to buy.

They’ve also worked with banks left potentially on the hook for foreclosure-related expenses, helping line up new developers to take over and finished many affected subdivisions.

“We’ve worked very hard to be outside the box on a lot of these,” Joyner said. “Each one is a new adventure.”

Stone Hill and Ravenstone have been special cases from the start, mainly because of the size of the two subdivisions. Between them they include about 600 homes, Joyner said.

And in their case, two insurance companies have balked at paying, arguing that the city is requiring more work than their policies were meant to cover. The dispute landed in federal court in 2011, and it’s far from clear when the litigation will end.

A federal magistrate judge, Patrick Auld, is mulling requests from all sides for a dismissal in their favor. He’s had the motions in hand since the end of 2012 and has yet to issue a decision.

“Far as I can tell, we’re still waiting,” Senior Assistant City Attorney Fred Lamar said.

The insurance companies have dropped a request that Auld force the city to settle the case for a once-offered $357,000. As the parties wait, they “have not had any more talks” about settling, Lamar said.

City lawyers in late 2012 told Auld they want $781,114 from the two companies.