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Minot: Developer who received major federal funds fails to provide housing

MINOT, N.D.—The City of Minot says it is taking corrective action to address a local developer's failure to perform under a federal grant.

In 2013, the city entered into an agreement with 16th Crossing LLC to spend $5 million in Community Development Block Grant-Disaster Recovery Development funds to provide public infrastructure improvements to a proposed development in southeast Minot.

Although not required to do so by the development agreement, the city also spent an additional $951,194 from other funds on public infrastructure for this development.

In exchange, 16th Crossing was to construct 178 townhomes and provide 350 manufactured homes on properties in the neighborhood. A minimum of 51 percent of the townhomes and mobile homes were to be set aside and offered at a price affordable for low- to moderate-income buyers. The development agreement called for completion of the townhouses and mobile homes within two years.

Of the 178 townhouses, the city lists 34 townhouses as completed and occupied, with 15 occupied by low- to moderate-income households, or 44 percent. The city stated the developer contends an additional 15 townhouses are either built or being built and are unoccupied.

According to the city, several meetings were held with the developer over the past two years to attempt to move the project forward. To date, the developer has not made significant progress towards completing the project, nor has the developer offered a viable proposal to bring the project into compliance with the agreement, the city stated in a release Tuesday.

A representative of the development firm, contacted Tuesday, had no comment at this time.

The city states the developer also has failed to provide sufficient documentation or information establishing that it has the ability to meet the obligations of the development agreement. The city council approved a motion on Monday to terminate the agreement with the developer effective Friday and seek to recover the federal and city dollars spent on the project from the developer.

"To ignore the developer's default in this situation would expose the City to potential adverse findings should this project be audited by HUD," Mayor Chuck Barney said in a prepared statement. "Beyond that, the City's failure to recover the HUD funds used on the project could result in the City having to pay those funds back to HUD using City dollars. That is something we simply cannot afford."

As a recipient of CDBG-DR funds, the city is required by the U.S. Department of Housing and Urban Development to proactively assure that all investments of federal dollars comply with the agreements made for their expenditure. Failure to do so could compromise the city's current and future HUD funding.