Whitefish to Explore Agreement with Housing Whitefish to Take Over Depot Park Townhomes Development

The Whitefish City Council voted at its most recent meeting to have the city manager explore negotiating a developer agreement with the nonprofit Housing Whitefish to complete the Depot Park Townhomes project. Such a deal would take the completion of the affordable housing project out of the hands of the Whitefish Housing Authority as the development’s May 2027 deadline grows nearer.

The move to transfer the project away from the Whitefish Housing Authority was undertaken after its board determined it was in the best interest of the project and the community to do so, according to City Manager Dana Smith. The property, a 1.64-acre piece of land north of Railway Street and east of Columbia Avenue, was transferred to the housing authority for development about five years ago, in keeping with the city’s 2017 Strategic Housing Plan, which identified development of workforce housing there as a high priority project. The preliminary plat for the 22-townhome planned unit development was approved about three-and-a-half years ago, and the final plat was approved by the city last month.

In a report delivered to the council, Smith cited turnover and limited staffing at the housing authority and a costly jury verdict in a defamation lawsuit earlier this year as “unforeseen barriers” that make it “nearly impossible” for the affordable housing development’s May 2027 deadline to be met.

Members of the council spent some time at the recent meeting acknowledging some of their frustrations with the problems that have plagued the project off-and-on for years, with some even entertaining ideas about some sort of “reset.”

But for Councilor Steve Qunell, a reset would mean a fundamental change to the project’s intended purpose.

“I can’t think of a single developer that’s going to build something there and be able to sell it affordably,” he said. “If we want to hit reset we should get as much revenue as we can, which would not be affordable.”

In his remarks ahead of the vote, Councilor Ben Davis suggested that the progress that has been made, which has included the installation of piping in the ground, would make alterations to the development plan extremely costly.  

“I know it’s got a thorny past, but I still think it’s a good project and there’s a lot of success to be had here,” he said.

The city has so far committed almost $3 million to the project, including an infusion of an additional $2 million from American Rescue Plan Act funds that was requested by the housing authority in the fall of 2021 because of risings costs.

Rising interest rates and increased buildings costs prompted the council to take additional action last spring when it amended the developer agreement to extend the terms for a May 2027 completion date, adjust the pricing for the townhomes, and to approve a variance that would lower the cost of sidewalks, landscaping and second layer of asphalt. The city has also discussed using funds held by the city for another affordable housing project, Alpenglow II, as an interim financing option to keep costs down on the project.

After discussion, and input from city staff and other involved parties, the council voted 3-2 Monday night in favor of directing the city manager to negotiate a developer agreement with Housing Whitefish. Councilor Frank Sweeney was absent from the meeting, as was Mayor John Muhlfeld.

The two opposition votes came from Councilors Giuseppe Caltabiano and Rebecca Norton. Caltabiano worried that they could be dealing Housing Whitefish a bad hand in delivering them the project, and repeatedly shared his belief that the project should be opened up to a public bidding process, which he believed might create some cost-savings opportunities but would also still give Housing Whitefish a chance to land the project.

Norton agreed with the idea of opening it up to a public bid, but seemed to focus much of her concern on the unanswered legal questions facing the Whitefish Housing Authority as it continues to navigate the aftermath of a $1.5 million jury verdict delivered against it earlier this year in a defamation suit brought against it by one of the housing authority’s former executive directors, Lori Collins.

In explaining to the council how legal issues are hampering the development, City Attorney Angela Jacobs referenced the jury verdict, saying that currently there is a judgment lien attached to the housing authority’s properties, including the Depot Park Townhomes. Meanwhile, the housing authority is appealing the jury verdict to the Montana Supreme Court.

“I don’t know what the Montana Supreme Court will do with it. I will say that jury verdicts are often very hard to get flipped,” Jacobs said. “Montana Supreme Court tends to give deference to what a jury awards. That said it has happened, I’ve had it happen. I think we’re going to have to wait until that sorts out until we really know what the effect of this $1.5 million judgment lien is.”

According to Jacobs, the housing authority is exempt from having its properties levied upon, meaning creditors could not sell the property. She said that the city would also likely be exempt if it took ownership.

Jacobs went on to say that there is another aspect of the case, which is that the Whitefish Housing Authority is being sued by its insurance company, which she described as arguing that although it paid for the housing authority’s defense, it was not on the hook to pay the judgment.

“There’s definitely some legal issues that need to be worked out,” Jacobs said.

While Norton wanted the council to take more time to let the legal issues play out to get a better understanding of the situation, Smith assured the council that city staff would take various contingencies into account, and would be waiting for the necessary legal opinions to be delivered and actions to be resolved before finalizing any deal.

She portrayed the council as voting more on how to direct staff, and said any agreement would be brought back to them for final approval.

Looking at the bigger picture, Councilor Andy Feury said that he believed legal issues would sort themselves out, and that he does not think the city would put Housing Whitefish in a position to take on legal liability related to the Whitefish Housing Authority’s issues. As for overhauling the project, Feury indicated that there was too much invested and too much progress made to change course at this point.

“The other thing that is important to me is it was a fight with the neighborhood to come up with a project that was palatable to them. And I think that we do owe that neighborhood. And I’m assuming it’s a lot of the same people that live along the street that are going to look at it,” he said. “And if we suddenly change and go back, I guarantee you this room is going to be filled every night that we talk about it. And it’s going to be filled with people that are really upset with us. And I would be upset if I lived there.”

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