Santa Ana files lawsuit after company halts construction of homeless shelter

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Santa Ana filed a federal lawsuit this week after a company halted construction of a crucial homeless shelter in the city.

The long-awaited Carnegie Avenue homeless shelter was nearing completion when the company that owns the property, Dyer 18 LLC, reportedly stopped working there late last week. The city is now ask for an injunction ordering Dyer to continue building the homeless shelter.

The lawsuit comes just months after Orange County recorded the highest number of homeless deaths in a single year.

“Without the shelter, more than 200 homeless individuals will lose access to temporary housing and potentially remain homeless in and around Santa Ana,” the lawsuit states. “This is the consequence of Dyer’s actions… Without court intervention, the shelter will remain unfinished, causing severe hardship for those who depend on it.”

Following City Council’s approval, the city signed a long-term lease agreement with Dyer on March 1, 2021 to operate the shelter in the 29,000 square foot building at 1815 E. Carnegie Ave.

The plan was for the city to initially provide 200 beds at the Carnegie shelter before later adding 100 more beds. In the lawsuit, the city says a major provision of the lease was that the city had the option to buy the property for $9.2 million in the second year of the deal — beginning March 1 — for a period of five years.

“In a shrewd ploy to deprive the city of the option to purchase the Carnegie property and coerce the city into forfeiting that right, [Dyer] alleged several breaches of the lease agreement by the city,” the lawsuit states, “by which [Dyer] claims the option to purchase is no longer available to the city and has threatened to terminate the lease.

A homeless man in an old encampment on the bed of the Santa Ana River.

(Allen J. Schaben/ Los Angeles Times)

City officials found construction had stalled on the property since at least Friday, even though it was nearing completion and was scheduled to open later this month or in April, according to the lawsuit. The city argues in a press release about the lawsuit that it appears to be driven by the belief of Dyer’s representatives, Ryan and Jeremy Ogulnick, that the Carnegie property is now worth “more than the purchase price agreed with the city” and that they “wish to delay the sale for tax purposes.

The city also claims in its lawsuit that Dyer may retaliate in response to the city’s filing of a lawsuit earlier this month that made similar claims to the federal lawsuit in order to get the company to comply with the lawsuits. terms of the lease agreement and allow the city to purchase the property.

Representatives for Dyer could not be reached at press time and calls to a number listed as belonging to the company went to an unrelated company.

“Under the lease agreement, and at the expense of the city, [Dyer] is obligated to construct, furnish and install in the Carnegie Property all improvements to enable the city to operate the shelter,” the state’s lawsuit reads.

According to the state’s lawsuit, Ryan Ogulnick contacted the city in late October and said he was concerned about selling the property to the city because it could have “serious tax implications for him.” He later provided an amendment to the lease agreement to the city that voided the city’s option to purchase. The city did not accept the proposed amendment.

“In response, Dyer began a series of disturbing correspondences with the city alleging various breaches and breaches of the lease contract by the city, including late payment of rent, late payment of construction costs for improvements Dyer was making to the shelter, and a lack of prior notice to Dyer of the IF Operator Agreement,” the state lawsuit states. “None of these alleged violations were ever raised by Dyer prior to the city’s dismissal of Mr. Ogulnick’s requested change to the lease agreement, and the city has contested all of them. Dyer submits that because of these alleged defects and breaches, the purchase option in the lease agreement is no longer available to the city.

In the federal lawsuit, the city also noted that the Carnegie shelter is required as part of a 2019 settlement agreement regarding a federal lawsuit launched by homelessness advocates against a few cities after a city withdrew from tents near Angel Stadium. As a result of this lawsuit, several cities had to open emergency homeless shelters, and Santa Ana pledged to open a 200-bed homeless shelter.

At that time, the city already had a 200-bed shelter, the Link, and the county-run 425-bed shelter, the Courtyard. Both shelters have since closed.

Currently, the city has 100 beds available at a shelter on Commonwealth Avenue in Fullerton and another 75 beds at the Salvation Army Hospitality House. City of Santa Ana spokesman Paul Eakins said Tuesday the city has reached an agreement with the county to provide priority access to 125 beds for Santa Ana residents at the Yale County shelter. Street in Santa Ana, which has a capacity of 425. Eakins also said the city has a family motel program for families in need of shelter.

However, there appeared to be a shortage of accommodation beds last year in the city when a homeless encampment appeared in the parking lots of a Mexican cultural center, El Centro Cultural de México. Dozens of people lived in tents in front of the center until the city cleared the lots through a clearance order.

In the federal lawsuit, the city also took umbrage that construction halted despite the city’s recent approval of additional funding for the site.

The city says in the lawsuit that the lease contract estimated the construction cost to be about $8.5 million with an additional contingency cost of $850,000. However, in January, Dyer told the city it would need to use the contingency money and an additional $1.3 million to complete construction. City Council then approved an additional $2 million for the project in mid-February. This increased the total allowable expenditures for the project to over $11.3 million.

“This is a shocking turn of events, and particularly at odds with Dyer’s public claims of expertise in building homeless shelters quickly and cost-effectively…” the lawsuit states.

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