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Summerset hearing focuses on City Hall's promises to landlord during crisis

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I got a glimpse Monday morning at City Hall of public policy in action.

Turns out it can be complex.

Independent Administrative Hearing Officer Michael Flores at 9 a.m. sharp convened the first day of the Summerset Village appeal hearing.

I was there. But I had a late-morning appointment across town, so I left at about 9:40. I’m going to charge ahead with a few observations. I will stipulate (might as well use the hearing’s lingo) that subsequent events on Monday may have rendered my views irrelevant.

The audience in the council chamber was decent-sized, but not as big as I expected. I’m guessing about 50 people. About 35 were there as a group. Shortly before the hearing began, they moved from one side of the chamber to the other.

“We are down to just a few issues,” Stephanie Borchers, the Fresno-based lawyer hired by Summerset owner Chris Henry, said in her opening statement.

It’s no secret that the Henry camp and city officials have been negotiating for months on the 1,450 citations issued late last year for alleged code violations at the sprawling Central Fresno apartment complex.

The big problem was the loss of natural gas service throughout the complex in mid-November. The tenants – perhaps 1,000, perhaps more – had no safe, reliable source of heat and hot water.

The result was a housing crisis of uncommon intensity. Everyone – city officials, business interests, community activists, concerned citizens – got involved.

Each of those 1,450 citations carries a $200 fine. Henry is appealing the $290,000 bill. Borchers was telling Flores something he already knew: The two sides have come to agreement on the validity of many of the citations.

Borchers cautiously acknowledged that Summerset prior to the gas shutdown wasn’t in the best of condition.

“Mistakes happened,” she said, producing for English teachers everywhere a perfect example of the passive voice.

Borchers said Henry has spent $1.6 million getting the complex up to code.

“The property has been completely rehabilitated,” Borchers said.

It was here that Borchers got into the meat of her argument. She brought up the concept of promissory estoppel. This is the principle that a promise made in certain situations is legally enforceable even though the promise wasn’t put in written form. This concept usually comes into play if the promise spurs someone to do something, and that act comes back to haunt him.

I gather that promissory estoppel usually involves two private parties. But, Borchers said, promissory estoppel can also apply to City Hall.

Borchers brought up promissory estoppel because Henry claims that city officials promised to waive the $290,000 if he fixed the violations as fast as possible.

I give you a big slice of Borchers’ statement, and the reply from Deputy City Attorney Chad Snyder.

“Simply put, the question becomes can the city be held to keep a promise, to keep a representation that was made by city representatives?” Borchers said. “And the answer is yes.”

Government agencies as well as private individuals can be held accountable for promises, she said.

“There is just an additional factor that comes into play,” Borchers said. “And that factor is whether the public interest is outweighed…. In other words, if you make a promise and it will hurt the public, even though you made that promise you don’t have to keep it. Then estoppel doesn’t apply. Our position here is the city’s promise – and I use the term ‘promise’ very loosely, somebody doesn’t have to say ‘I promise this will happen,’ it’s a course of conduct, it’s relying on that course of conduct – the question is the public’s interest.

“Of course the public, as I’ve already stated, has a very strong interest in safe and affordable housing. But the fines don’t provide safe and affordable housing. The notice and order, and the correction, and the communication and cooperation with the city is what provides safe and affordable housing. The fines are simply gravy on top for the city. The fines don’t go to the residents of Summerset. The fines go to the city. The fines don’t go into the community, the fines go to the city.

“So, yes, the public has a huge interest in safe and affordable housing, but our position is the fines don’t do anything to provide that. And, more importantly, the public also has a great interest in being able to rely on the representations of its city agencies.”

Borchers said the city couldn’t tell a property owner that he had to fix only half of the violations. That clearly would harm the public. But that isn’t what’s at play in the Summerset case, she said.

Borchers concluded by returning to the harm done to the public interest if the word of public officials, given in the midst of a fast-paced crisis, is found to be worthless.

Property owners “need to be able to rely on what they’re being told by code enforcement officers because decisions are being made on a daily basis, based on these representations….If those representations can’t be relied on, then the entire basis of code enforcement helping to improve the community falls apart,” Borchers said.

Snyder then took the public microphone.

“Very briefly, under the City Charter the City Council is in charge of all legal matters unless expressly delegated,” Snyder said. “In the code, no city employee has the authority to bind the city. The city manager has the authority to waive code enforcement fines, but only up to $100,000 and then only in the case of a property changing ownership as an incentive for the new property owner to effect the necessary repairs to bring the property into compliance with the code.

“Further, before the fines are waived the parties must execute a written contract signed by the city manager and the City Attorney’s Office. In the present case, the evidence will show that the fines were $290,000. Therefore, a waiver could only be made by a majority vote of the City Council.

“The facts will show that no city employee ever promised to waive the $290,000 in fines. The representations that were made were that code enforcement would not take further enforcement action so long as progress was being made in correcting the violations of the property. That, in fact, is what code enforcement did….They kept their promise that so long as progress was being fines would be deferred.”

With opening statements out of the way, the hearing settled into testimony. First into the hot seat was Brad Hardie, president of Fresno-based Regency Property Management. Henry hired Hardie in November to fix things at Summerset.

I could stay for only about 15 minutes of Hardie’s statements (he was responding to Borchers’ questions).

But I caught enough to sense that the Summerset crisis in the last six weeks of 2015 and into early 2016 was a legal, political and economic minefield. The mass media portrayed the story as one of victims (this the tenants most certainly were) vs. a greedy slumlord unintentionally abetted by a City Hall asleep at the wheel (a shaky theme).

But it was clear from the beginning of Hardie’s testimony that 1.) Henry had a number of possible responses at his disposal; 2.) No one at City Hall wanted to watch a thousand-plus Summerset tenants permanently dispersed to the four corners of Fresno; 3.) Mayor Ashley Swearengin and City Manager Bruce Rudd needed both a carrot and a stick in their early negotiations with Henry.

That carrot could take only one form – promises regarding the fines.

Did Henry act fast enough? That’s a key question.

Swearengin is termed out in three months.

Crises are a constant at City Hall. The new mayor and (most likely) the new city manager will need all the negotiating tools they can get, including the authority in stressful situations to make binding promises.

Lee Brand and Henry Perea: The Summerset hearing may eliminate that tool from the mayoral tool belt.

Then, again, if you’re a City Council member that may not be such a bad thing.

George Hostetter
George Hostetter is The Sun’s Fresno Civic contributor – covering the City of Fresno, County of Fresno, and Fresno Council of Governments.

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