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Sheehan pressured to reveal POKO problems

Norwalk City attorneys stand on the Stamford Superior Court steps Friday in Stamford.

Updated, 1:42 p.m.: Photo changed.

NORWALK, Conn. – Tim Sheehan is done being grilled by Jason Milligan’s attorney.

Attorney David Rubin queried Sheehan for two days in Stamford Superior Court, seeking to prove that “POKO” cannot be built as designed and to paint the famed Land Disposition Agreement (LDA) as invalid.  Judge Charles Lee described the conversation as an “argument.”

Along the way Sheehan characterized Milligan behaviors he thought unscrupulous and immoral, a key component of an unfair trade practices accusation, and said he’s confident construction on POKO will resume within a year, perhaps soon.

Among other nuggets revealed by Sheehan’s tortuous appearance:

  • The Redevelopment Agency and the City were in the dark when Ken Olson of POKO Partners got Zoning approval to move parking requirements onto an adjacent parcel (now a major obstacle in restarting construction)
  • It isn’t just the parking spaces, two of Milligan’s Isaac Street properties are needed to meet the project’s floor to area ratio (FAR) requirements for Zoning
  • The Parking Authority is close to approving a plan to realign Wall Street parking

 

 

A primer: the lawsuit

The City of Norwalk and the Norwalk Redevelopment Agency are suing Milligan and Richard Olson of POKO Partners, because Olson on May 31 sold Milligan five Wall Street area properties that were slated to be used for phase II and III of Wall Street Place, known to most laypeople as “POKO.”

Milligan bought the properties under the LLC Wall Street Opportunity Fund; Olson sold them under the LLC ILSR Owners. The plaintiffs contend that Olson did not submit Milligan for Agency approval before selling the properties; the Land Disposition Agreement (LDA), the contract governing the land, specifies that the Agency must give approval for a new redeveloper for the project.

Milligan’s financial arrangements are muddy, as the purchase and sales agreement for the properties – 21, 23 and 31 Isaac St. and 83 and 97 Wall St. – said that a $5.8 million loan issued by CC Rivington would be paid off, but there’s no evidence that it was, according to testimony delivered Tuesday.

CC Rivington assigned the mortgage to a Milligan-controlled LLC, Komi Ventures, and Komi also has a $5.2 million mortgage on the properties, according to court testimony. The properties are appraised by the Norwalk Tax Assessors as being worth $4.2 million.

A “participation agreement” was noted in the documents, Lee said Wednesday.

“It’s … possible there was a deal made with Rivington to participate in a bigger equity reward later. The papers are pretty opaque at this point,” Lee said.

The properties include a former municipal parking lot at 23 Isaac St., transferred by the City to POKO as part of the complicated deal to jumpstart development. Construction on Wall Street Place I stalled in mid-2016, and Citibank foreclosed on the project but declined to buy Olson’s other properties. The project has been sitting there ever since, as the City and the Redevelopment Agency negotiated with Citibank and its preferred developer, JHM Group, with the City pressuring Citibank recently with blight citations and a notice of default.

An arbitration session was held Wednesday. Norwalk Corporation Counsel Mario Coppola declined Friday to reveal if progress had been made, noting that it’s a “confidential process.”

Mayor Harry Rilling will not be releasing any statement regarding Wall Street Place “until the court renders its decision in the pending hearing,” Coppola wrote.

 

Isaac Street

Sheehan, Redevelopment Agency Executive Director, on Tuesday complained that Wall Street Opportunity Fund had in June leased the former parking lot to Komi Ventures for 25 years, then Komi in August leased the lot to Milligan Real Estate.

This would make it difficult to redevelop the area and is in defiance of plans to increase residential housing, Sheehan said.

Before Milligan bought the properties, Citibank already had a “bit of dilemma” for restarting the Wall Street Place phase I construction: the Zoning Commission had allowed Ken Olson of POKO partners to move some of the required parking spaces off of Phase I onto Phase II, Sheehan said.

That became a problem when Olson died and Citibank took Phase I, as the two parcels were in different ownership.

Sheehan said Tuesday that the Redevelopment Agency and the City were unaware that Olson had gone to Zoning to get the parking switched. Citibank found out after taking Phase I through a deed-in-lieu transfer, he said.

Rubin pressed him on these points repeatedly on Friday, pointing out that the LDA wasn’t amended to show the parking changes.

Sheehan commented that Olson had assumed the City would agree to the change in parking, it wasn’t that he was hiding the issue.

But it’s more than the parking: parts of Isaac Street were always going to be abandoned, to connect the two phases of the development, Sheehan said, identifying 23 and 21 Isaac St. as part of that plan. The Isaac St. abandonment would allow the development to meet its floor to area ratio (FAR) requirements, he said.

 

 

 

Why a lawsuit?

The Redevelopment Agency has an history of working with developers through an LDA, with both sides of the equation upholding the agreement, Sheehan said.

“I think this whole issue of how this has been handled completely uproots that and undermines it,” he said.

Rubin asked Sheehan on Friday what he saw as unscrupulous in Milligan’s behavior.

Sheehan described a May 31 conversation in the Mayor’s office, in which Milligan said he wouldn’t be closing on the properties the next day, when in fact the transfer of the properties had already been recorded in the Town Clerk’s office.

Milligan had said he wanted to be the redeveloper but “then within days” was trying to sell the properties at a profit, and that “reflects insincerity relative to the intent to be the redeveloper,” Sheehan said.  He went on to say that Milligan has no plan for the properties.

Rubin asked if there was any conduct by “the Milligan defendants” that predated the transfer that was immoral, unethical or unscrupulous.

“For me, one of the larger issues is that if Wall Street Opportunity Fund wanted to acquire the property and they had understood the requirements under the LDA, which they obviously did…what was the hesitation on the part of ILSR and Wall Street Opportunity Fund in disclosing that to the Redevelopment Agency and seeking approval?” Sheehan said. “It’s the secret nature of what was being contemplated between ILSR and Wall Street Opportunity Fund and the shadow that they cast that deal under.”

Rubin pointed out that an unauthorized transfer was contemplated in the LDA and questioned how it could be “unfair, immoral and unscrupulous if it actually happens.”

“You tricked me,” Lee said to Rubin. “I misunderstood what you said in our initial hearing when you said there are rights to an unapproved sale. But, yeah, these things happen, so do breaches of contract and all these other things. There are remedies, it doesn’t mean they’re allowed. I think, you really mentioned, the key to this whole case is why not follow the procedure? That’s what I haven’t heard anything about. Now hopefully Mr. Milligan can take the stand and explain, why not just do what you are supposed to do? Why do all this?”

“Is not following the procedure unethical, unscrupulous and immoral?” Rubin asked Lee.

“You’ll have to ask (Sheehan),” Lee replied. “I’ll tell you later.”

Rubin later pressed Sheehan on Wall Street-area blight, asking why the Agency objects to Milligan renting out storefronts and adding life to the street.

“The bottom line with this is the redeveloper shouldn’t be out leasing the existing space, they should be out trying to purchase the properties to effectuate the development,” Sheehan said.

“This is a blighted area for the last 14 years, where nothing has gotten done and you have somebody that is putting in vibrant tenants into a neighborhood, that can coexist at the same time, while it is pursuing redevelopment status,” Rubin replied.

 

 

Wednesday’s grilling

Sheehan’s testimony began Wednesday with Rubin pressuring him to explain New Street, a pedestrian plaza shown on the plans as going through existing buildings next to POKO, at one point suggesting that the City would have to take those buildings to create the street.

“Is it fair to say that there is a road that needs to be constructed in connection with phase I in order to complete phase I?” Rubin asked.

“New Street is considered a phase I construction improvement, infrastructure improvement, under the LDA,” Sheehan replied.

“So the answer is yes?” Rubin replied.

“Can you repeat your question?” Sheehan shot back.

“Is it fair to say, is it correct, to say the New Street needs to be completed as part of phase I?”

Redevelopment Agency Attorney Joe Williams objected, calling that ambiguous as the question did not identify who would be responsible for building New street, and the Sheehan/Rubin duo was off to the legal races, with Rubin asking, “The construction of the new street under exhibit the LDA… is part of phase I, correct?” and Sheehan replying, “It’s a phase I infrastructure improvement and in the LDA itself there is a lot of flexibility given with regards to public infrastructure related to the project.”

“Does the new street need to be completed in order for them to be a certificate of completion issued in connection with phase I?” Rubin persisted.

“My answer to that would be no,” Sheehan replied.

Rubin continued trying to get Sheehan to say that the project can’t get a certificate of completion or a certificate of occupancy as-is, pressing on details such as utilities and Wall Street parking.

A plan developed by POKO to realign the parking on Wall Street is in a “final review” by the Parking Authority and its consultant “before implementation,” Sheehan revealed.  He surprised Rubin by telling him that some infrastructure improvements had been completed.

Traffic signalization work had been done, Sheehan said.

After nearly two hours of Sheehan’s laborious testimony, Rubin got the answer he was looking for.

“My question is subject to a yes or no, really,” Rubin said. “Can a CO be issued for phase I based on the properties currently controlled by the phase I owner under the existing plan?”

Williams objected, stating that the question had been asked and answered. Lee stepped in and listed issues Sheehan had identified, reasons why the certificate would not be issued.

Sheehan agreed the list was accurate.

“The answer is no, then,” Rubin said.

“It is no, right?” Lee said.

“The answer would be no,” Sheehan said.

“There we go,” Lee said.

So, no, if the construction on Phase I were completed in accordance to the plan the construction began under, the project would not be given its certificate of completion.

The day had begun with Sheehan announcing that there’s probably 14 months of construction left on Phase I.

He said, “I think public parties are very focused on moving this project forward and would do anything they could to expedite any changes that they needed to do that the public parties are in agreement with.”

15 comments

Jason Milligan December 17, 2018 at 4:40 am

Nancy,

First of all, thank you for sitting through days of court. You have the patience of a saint. I really appreciate it, and it is the only way that the people of Norwalk will start to get the truth!

Jason Milligan December 17, 2018 at 6:07 am

Tim is amazing at talking. When he talks it sounds so important and correct. After 4 days of listening to Tim give 10 minute responses to very simple yes or no questions, it started to look like he was lying. Tim reluctantly revealed how bad off the POKO project is. It is actually worse off than even I thought.
Tim explained that the original LDA was a heavily negotiated document that took 2 years to get fully executed by all parties. The LDA must be amended if there are going to be substantial changes to the development project as outlined. Substantial is defined as 10% or more. Like changing 10% or more of the number of apartments, 10% or more of the square feet of the project, or 10% or more of the parking spaces etc.
Any “Substantial Change” to the LDA requires an amendment. Amendments must go through a public process that includes planning commission and City Council approval. The POKO LDA went through several rounds of changes. The 1st amendment to the LDA was created to deal with the substantial delays to the project. Then there were substantial changes to how the project was going to be financed. (Hint: more public money needed.) These changes created the Loan Recognition (LRA), and the LRA amendment. Both went through the public amendment process. Changing the LDA was getting increasingly harder because the public was fed up. The last changes to the LDA were only granted by the City Council after Citibank gave every assurance that all the money was in place and that the Redeveloper was on solid financial footing. Less than a year later a $10 Million “budget gap” was discovered. Meaning even after getting tons of public money that the project was $10 Million short.
At what point would city officials ever cut bait?
What is very interesting is that the LDA can be fully approved and valid in one way, but the project cannot be built without a valid zoning approval. Similarly, it is possible to get a project approved by zoning that does not match the project in the LDA.
When things got really bad with Phase I, the Redeveloper allegedly made an amended zoning application without telling the Redevelopment Agency what it was doing. He sought and received zoning approval to build a Substantially different project than what is required by the LDA.
Tim claims ignorance of all this, but how could Tim miss months of public zoning hearings for a large project that was already embarrassing to the Agency? Zoning hearings are reported on. This project was constantly in the news at the time. If Tim really did miss it all then what does it say about his leadership? What seems more plausible is that he was keenly aware of what was going on, he was complicit, and now he is covering his tracks.
The Redeveloper’s new zoning application moved 43 out of 256 required Phase I parking spaces off-site. Putting parking spaces off-site is permitted by zoning so long as it is on a parcel that you own or you have at least a 25 year lease. Moving approximately 20% of the project parking spaces off-site is not permitted by the LDA. It was a “substantial change” that was not approved by the Agency or Council. Removing a large portion of the basement and the automated parking garage was substantial. The project received a $5 million grant to build the automated parking garage from the Department of
Economic & Community Development (DECD). $3.4 million of the $5 million was spent, and now the garage was being cut back to save money.
Around this time, the Redeveloper must have decided he didn’t have the money to buy the Dias property or the People’s chicken property. He had agreed to buy the Dias property (El Dorado Club) for $2.5 million and the People’s Chicken property for around $600,000. Over $3 million for the 2 properties. Those 2 properties were going to be demolished to make way for New Street #1 which was the main entrance to this 3 Phase project, and part of the Dias property would be later incorporated into Phase III. The LDA requires that New Street #1 be built in order to get a certificate of occupancy for Phase I. It is the City’s responsibility to construct New Street #1. The LDA calls for most of the utilities for the project are to go under New Street #1.
Phase I also was using part of the Dias property to get enough land mass to support the Floor Area Ratio (FAR) and the density of Phase I.
At some point, and the Redeveloper & Agency realized that they didn’t have the money to buy the Dias property, so they concocted an elaborate plan to grab the needed FAR & density from Phase II, and to put the parking there. Never mind that doing this would severely impair Phase II.
Side note: There is no legal way to move development rights across city streets even if you own both sides of the street. The desperate parties to the POKO agreement decided to abandon part of Isaacs st to give to POKO to create a land bridge that would connect Phase I & Phase II of the project.
Ok. Back to when Phase I was failing badly. It was a free for all. Substantial changes were being contemplated and pursued all over the place. Some of them passed zoning. None of them went through the public amendment process. I guess they all figured they would amend the LDA retroactively once they had a completed project to point to. Everybody was desperate to get some project, any project built.
Tim testified extensively about New Street #1. He claimed the Agency removed it from the project. Removing an entire Street from a development project seems to be a “Substantial Change” that would require an amendment. New Street # 1 housed all the utilities and it was the main entrance to the 3 phased master site plan.
The LDA & its amendments are a contract, a contract that is recorded on the land records. A contract that I relied on when purchasing certain properties. The City & Agency have remedies available under the contract. They do not like the permitted remedies and they are trying to invent new ones through the court system. It is sad and it is a waste of taxpayer money. It is also terrible that they are turning away me, the person that is energetically and enthusiastically trying to help improve the area. I have risked large sums of money with no guarantees and serious risk. I have skin in the game. The city and Agency prefer JHM who has no skin in the game and who does not care about Norwalk. Citibank does not care about Norwalk!
Summary:
POKO Phase I as described in the LDA cannot conceivably be built without tearing down part or all of the structure that is there. Phase I cannot get a certificate of occupancy without many “Substantial Changes” to the LDA and to zoning.
Phase I does not have a valid zoning approval. Phase I does not have the requisite property to get a zoning approval based upon FAR, density, parking etc.
Phase I cannot get a certificate of occupancy without building New Street #1. New Street #1 cannot be built without acquiring and demolishing the Dias & People’s Chicken properties.
Here is the BIG kicker. The current owner of Phase I knows all of this. They know how much they need the properties I bought to make Phase I work. They had a right to buy the properties and they had a right of first refusal to match my offer. They chose not to. Citibank & JHM are not willing to invest any money until they know they have a viable approved plan. The plans they were pursuing in secret required the City of Norwalk to kick in an additional $2 million on top of the $4.4 million, and they wanted a substantial decrease to the number of public parking spaces they were required to provide.
One piece of good news: The city/Agency has only spent $111,000 of the $4.4 million of taxpayer money that is required to be spent on POKO. $4.4 million was approved, appropriated, and $2.7 million was funded. That is good news. There is a way to never spend (waste) that money on the POKO project.
CANCEL THE LDA!! Right now at this moment because the properties are in default the City and Agency can cancel their obligations under the LDA. Tell Citibank to pack their bags. Let some other local developer come along to redesign and construct Phase I in a more modest way.

Bill Nightingale December 17, 2018 at 8:42 am

The first thing that needs to happen is Tim Sheehan and the Redevelopment Agency need to be completely removed from this and held accountable. That they are still involved is the definition of insanity.

Secondly, the city has to remove itself entirely from the project and let private owners figure it out according to Norwalk zoning regs. If that means tearing down the tyvak structure so be it. Again, mark my words, until this project clears to private developers at market price it will go nowhere.

Jason Milligan December 17, 2018 at 9:26 am

Bill you are spot on.

There is a huge conflict of interest!

Most of the players that got us to this point are arguing to be the players to solve it. They have had 16 years. Their time is up! Their solutions are designed to cover their own rear ends, and they can’t let go of the failed POKO vision.

The 3 Phases of POKO were never good for the area. It is a blessing that it failed.

Can everybody please tell Tim Sheehan and others to LET IT GO!? Or does the City of Norwalk need to let him go?

POKO IS OVER!

cc-rider December 17, 2018 at 9:54 am

Nothing like just digging the hole deeper and deeper rather than admitting mistakes were made and where things are currently at in 2018. The (lack of) response by the city, common council and Sheehan to this entire situation is truly pitiful and a embarrassment.

carol December 17, 2018 at 10:38 am

agree sheehan and redevelopment as it is has got to go-same people in control for two many years.
let private developers take over. milligan lets get this monster fixed,city out sheehan out and redevelopment out. city bank is another problem.
can the public demand a hearing on what milligan has to offer??

Jason Milligan December 17, 2018 at 10:53 am

Carol,

I have emailed the city council collectively and individually numerous times requesting a public dialogue.

Super Mario blocks any public discussion and scares the council members into discussing.

“Can’t discuss when there is active litigation” nevermind the fact that the litigation was initiated in part so they could avoid talking about it in public.

Hey what ever happened to Harry’s POKO “Explanatory Statement”?

Did he realize nobody wanted to hear his excuses?

Bill Nightingale December 17, 2018 at 11:02 am

Reading the above shows just how deep Tim Sheehan is in over his head. Doesn’t seem to understand that private investors will always act in their own self interest. Time to hold to account those who got us into this mess. #MoveOnFromPoko

Rick December 17, 2018 at 11:05 am

What about all the other deals Sheehan has been involved with?

The State of Ct and the EPA have been waiting on paperwork from Day St , so the city can build on the lot and fill the six story building without concern for its renters. This paperwork insures a clean building on a clean lot.

Those now living in the new complex have no clue , they moved in and still the paperwork is missing.

Sheehan agreed with Susan the paperwork was sent three months ago, its no were to be found I think this POKO thing is just scratching the surface Bill.

EnoPride December 17, 2018 at 11:58 am

Careless incompetence and reactive, backpedaling behavior on the part of Tim Sheehan and City Hall. Doesn’t look good. Seems it would be in the best interest of City Hall et al to take this on the chin and to FINALLY hold a meeting with the business owners and residents of Wall Street, the WSNA, Norwalk Historical Society (Anybody remember to include them in such an historically significant area?), etc., to discuss transparently how those properties should be developed to best pay homage to Norwalk’s historic past (Let’s not erase Wall Street’s character with big, cheap looking fortress apartments every which way. We have enough of that visionless eyesore nonsense!), to best serve Norwalk residents and to encompass their vision.

Check your egos at the door, trust the public and include them in the conception of this development, City Hall. Any article you could read about urban revitalization discusses the significance of using public/residents’ input as an invaluable tool in your development planning/implementation. Why haven’t you heeded this pro tip? The locals will not steer you wrong as they know their neighborhood better than you all seem to. You would have a better final product for their involvement. As we are reading, the Wall Street business owners/residents possess vision and are mobilizing and taking great strides without City Hall to move things forward, as City Hall has been so exclusive. It is alluded to in Nancy’s article that there were decisions made here and there regarding this whole debacle without the Norwalk public’s involvement and opinion, which seems to be how City Hall regularly conducts business… behind closed doors. Maybe this debacle will finally open their eyes to the fact that if, all along, they “did the right thing”, planned the area with the public’s input from the beginning instead of playing God, we would have never been in this predicament, and a more appropriately developed area would be thriving in those spaces right now as we post. Norwalk needs new professional management desperately. No more amateur hour! Piberman’s right!

Adolph Neaderland December 17, 2018 at 5:30 pm

No mention of the almost certainty of mold in the entire structure, based on several years of unheated, unventilated exposure to the elements.

Coupled with the parking and concrete issues, a tear down.

When redoing, keep in mind that 180 city stakeholders voiced a “no more multi story mixed use” projects in downtown Norwalk at the 1st POCD session in October ’17!.

This current structure is completely out of place on Wall Street. Hardly an architectural fit!.

Milly December 18, 2018 at 6:44 am

Aldolph is 100% right. There has been water pooling underneath that building since they starting building it. Plus how much water and sewer system would it need
to work. They are always digging up streets in town next to all these new gigantic apartment buildings – whats that all about?

Paul December 18, 2018 at 12:54 pm

Nancy thank you so much for providing solid news and a forum for feedback. You certainly deserve donations to continue your great work!!

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