New London — The New London Housing Authority contributed $150,000 toward the purchase of the former Edgerton School property, the site of a controversial affordable housing complex that is the proposed replacement site for the troubled 124-unit Thames River Apartments.

The fact was uncovered recently by Interim Executive Director Lee Erdmann and was not only surprising but troubling to some members of the five-member Housing Authority Board of Commissioners.

Members said they were unaware of the financial stake in the success of the project, which has  stalled after the Planning and Zoning Commission rejected zoning amendments needed for the development in November.

Records show the $150,000 contribution towards the $600,000 purchase of the 120 Cedar Grove Ave. property was apparently approved at an April 1 special meeting of the board of commissioners. The contribution, however, does not give the authority partial ownership of the actual property but an interest in the development.

The vote was an authorization to former Housing Authority Executive Director Sue Shontell to “move forward with the Thames River Redevelopment Team and gain site control by utilizing funds from the New London Housing Authorities business activities account.”

A dollar amount is not mentioned in the resolution, which passed by a 4-0 vote. Three of those commissioners have since resigned: former Chairwoman Tambria Moore, Russell Carr and Art Costa. Shontell’s contract was terminated earlier this month.

The only member who voted on the measure and still holds a position on the board is Chairwoman Betsy Gibson. Gibson recalls it being her first meeting and said she was not aware of any dollar figure attached to the approval.

She said the action seemed logical at the time because the board was under pressure with a court order to fulfill its obligation to find replacement housing for the people at Thames River Apartments.

“I didn’t know. (Other commissioners) might have known, but I doubt it,” Gibson said. “I don’t think anybody shared that information.”

Attorney Robert Reardon had represented the Thames River Apartments residents in their long-running suit that resulted in a court-approved agreement to renovate or replace the three Crystal Avenue high rises for the benefit of the 124 families living in unsanitary and unsafe conditions.

The Housing Authority later enlisted the development team of Peabody Properties and Affordable Housing and Services Collaborative, now doing business as F.W. Edgerton LLC, to find an appropriate replacement site. The Edgerton School property was the purchased but has since faced roadblocks that have included opposition by neighbors and a rejection from the Planning and Zoning Commission that is now the subject of a Superior Court appeal.

It is unclear what would happen to the authority's $150,000 investment if the project does not go forward. 

Commissioner Kathleen Mitchell said her first question after hearing about the payment for the purchase of the Edgerton property at 120 Cedar Grove Ave. was, “Why weren’t we told about this?”

Mitchell said it raises questions of conflict of interest and transparency.

“If they had asked me I would have said 'stay as far away from this as possible,'” Mitchell said. “This was born as a result of the Reardon lawsuit, and it’s been a bone of contention every single day since. It will probably end up in the courtroom again. Is that something we should be involved in? No.”

Mitchell said while she supports better homes for the Thames River Apartments residents, she is not a fan of the proposal by F.W. Edgerton LLC because she is not convinced all options have been explored.

“Theoretically we should be supporting them since we’re partners with them. What happens if individuals on the board don’t support the Peabody plan? What happens if members of the board think there are better options? I didn’t vote for it. I was not on the board then,” Mitchell said.

Commissioner Jeanette Parker, a resident at Thames River Apartments, said she was also surprised about the revelation but supports anything that get the families out of the aging high-rises.

The housing authority has a lot on its plate. It is in the middle of an application to the U.S. Department of Housing and Urban Development that would essentially condemn the high-rises and allow the residents to gain Section 8 vouchers and move to a place of their choosing. And after the departure of Shontell, the authority is now searching for a permanent executive director.

Gibson said things will be different under a new director and the board will insist on being a part of all decisions taken on by Shontell alone in the past.

“There has to be accountability to what’s happening,” she said.

Erdmann said the housing authority’s stake in the development is not just the $150,000. A memorandum of understanding signed by Peabody Properties, Affordable Housing and Services Collaborative and Shontell creates a partnership.

That partnership, according to the memorandum, will give the housing authority 25 percent of the agreed-upon fee the developer would earn from its financial backers once the $40 million project is completed. While the total figure is an unknown, Erdmann said it could potentially be hundreds of thousands of dollars.

A portion of the agreement not specifically spelled out in the memorandum is the fact that the housing authority will also receive 25 percent of the “cash flow,” such as rents, from the new development.

Affordable Housing and Services Collaborative President Michael Mattos said that part of the agreement is spelled out in a different document when the two sides hashed out details of their partnership in response to a request for proposals.

“They wanted to be part of the development and keep a stake in this. That’s the way the RFP was written. We proposed a 25-75 percent split,” Mattos said.

Mattos said the housing authority would also be eligible for reimbursement of the $150,000 once the project is funded since that property acquisition cost, or “predevelopment cost,” is factored into the total financing that they will seek through a combination of sources.

Neither Mattos nor Erdmann would speculate on what the housing authority would stand to gain from developer fees or cash flow from the proposed development.

Erdmann said the two sides have yet to negotiate a master development agreement, though he said the terms of the memorandum could benefit the housing authority in the end — a source of revenue to help maintain other properties managed by the housing authority. Peabody Properties would manage the new development and relieve the housing authority of Thames River Apartments from its portfolio.

Since the housing authority on its own did not have the resources to build replacement housing and satisfy the court agreement, Erdmann said partnership “was a way to move forward in a way that the resources would be available to build replacement housing.”

Gibson said with the new board under new leadership she was confident the ultimate goal of moving people out of the high rises was achievable.

“I think we have a bright future at the housing authority,” Gibson said.

g.smith@theday.com