The opinion of the court was delivered by: Debevoise, Senior District Court Judge
On May 24, 2007 the court entered an order requiring that the parties show cause why an order should not be entered to the effect that:
1. The parties shall enter into an agreement setting forth the manner in which NHA shall complete its obligation to construct 1777 townhouses as required by the 1999 Settlement Agreement (the "Townhouse Agreement");
2. Except for the Townhouse Agreement the 1999 Settlement Agreement shall be terminated and no party shall have any further rights or obligations under it;
3. The appointment of the Special Master shall continue until further order of the court and;
4. When the Townhouse Agreement is executed (or, failing the execution of such an agreement when the court signs an order specifying the manner in which NHA shall fulfill its obligation to build 1777 townhouses) this action shall be dismissed with the court reserving jurisdiction to enforce the Townhouse Agreement.
Plaintiffs, Newark Coalition for Low Income Housing, et al., and Defendants, the Newark Housing Authority ("NHA") and the United States Department of Housing and Urban Development ("HUD") submitted papers in support of, and in opposition to, the order to show cause. A hearing was held, and thereafter Plaintiffs and NHA, with the assistance of the Special Master, attempted to reach agreement on the continuing obligations of NHA to Plaintiffs.
Having concluded that, except for the matters set forth in Schedule A to the order implementing this opinion, the court's monitoring of NHA should terminate, the court will enter an order terminating the 1999 Settlement Agreement (except as set forth in a Schedule A to the order implementing this opinion) and dismissing this case, retaining jurisdiction to enforce the provisions of Schedule A.
A. Original Settlement Agreement
In 1989 plaintiffs instituted this action to compel NHA to perform its obligations under the law and, in particular, to prevent NHA from demolishing approximately 1,506 public housing units constituting all of the buildings at Columbus Homes and three buildings at Kretchmer Homes. HUD was joined as a defendant. It was plaintiffs' contention that NHA had a statutory obligation to replace the demolished units on a one-for-one basis, that NHA had neither the ability nor intention to replace the units it proposed to demolish, and that instead of demolishing these units NHA should be ordered to renovate them and make them available for those desperately in need of low income housing.
There was evidence in the record which would support a finding that NHA was incapable of either completing new construction or maintaining its existing housing stock. There was an inordinately high vacancy level, and NHA was incapable of either reducing that level or preventing it from steadily increasing when units became vacant.
During the spring and summer of 1989, the parties to the proceeding engaged in intensive mediation conducted by Eric R. Max of the State of Office of Dispute Settlement. The parties ultimately arrived at a Settlement Agreement. After a hearing, the court approved the Agreement on August 17, 1989. Pertinent terms of the Agreement were the following:
1. A plaintiff class was certified which included (a) occupants of Kretchmer Homes between April 1, 1985 and the date of the court approval of the Settlement Agreement, (b) occupants of Columbus Homes between June 1, 1988, and the date of court approval of the Settlement Agreement, (c) individuals or families who had applied to NHA for admission to NHA's public housing as of the Agreement date and were on NHA's waiting list for public housing at any time after April 1, 1985.
2. NHA agreed to enter into contracts with one or more private firms to conduct studies to evaluate the preventive and ongoing maintenance, security, long term viability and feasibility and costs of rehabilitating all of NHA's public housing projects, except those which could be demolished under the terms of the Agreement. Based upon the studies, NHA was to propose a comprehensive plan for the modernization and rehabilitation of all of NHA's public housing projects that NHA found to be feasible to rehabilitate and which had long term viability as public housing after completion of rehabilitation.
3. The Agreement provided for the phased demolition of Columbus Homes. The object of the phasing was to ensure that NHA would meet its one-for-one replacement obligation. Buildings 5, 6, 7 and 8 would be demolished after construction contracts were entered into and notices to proceed issued with respect to 465 units. Buildings 3 and 4 would be demolished after construction contracts were entered into and notice to proceed issued with respect to 194 additional units and after NHA had acquired land and obtained HUD approval of sites sufficient to construct 728 additional replacement housing units. Thus it was contemplated that NHA would provide for the construction of 1,777 new housing units in exchange for the demolition of the 1,506 Columbus Homes units.
4. NHA agreed to file an application for court approval of a replacement schedule for completion of the 1,506 replacement housing units for Columbus Homes. It agreed that NHA would construct not less than 300 public housing units on the Columbus Homes site.
5. The Settlement Agreement provided for a vacancy repair program. Beginning with the second month after approval of the Agreement NHA was obligated to complete the repair and occupancy of 136 vacant housing units each month for a consecutive 12 month period. After 1,632 vacant units were occupied, NHA became obligated to complete the repair and occupancy of at least 68 vacant units per month until substantially all housing units requiring moderate repair were occupied. "Moderate repair" was defined to mean repairs for which the estimated costs of labor and materials did not exceed $3,000.
6. NHA agreed to enter into contracts for specified repairs at Kretchmer Homes. Conditions were specified for the demolition of Buildings 3, 4 and 5 at Kretchmer Homes, namely, (a) NHA would have completed repair and occupancy of the 1,632 vacant units referred to above or one year from the approval of the Agreement had elapsed, whichever was later, and (b) NHA had completed the Kretchmer Homes repairs.
B. Enforcement of Settlement Agreement
Sad to relate, although the Settlement Agreement on its face provided for great advancement in public housing in Newark, NHA proved utterly unable to implement its provisions. Construction of new units lagged woefully; repair and occupancy of vacant units were not accomplished; NHA did not approach meeting the conditions imposed for the demolition of Columbus Homes. It appeared that the management was simply not able to perform its responsibilities.
In 1992 two events occurred which changed the picture. Mr. Harold Lucas was appointed Executive Director of NHA, leading gradually to the creation of a new and more effective top management of NHA. In August 1992 plaintiffs filed a well documented application to place NHA in receivership in order to enforce the Settlement Agreement. The receivership proceeding laid bare the disastrous state of NHA.
Rather than appointing a receiver, the court held a series of hearings to attempt to deal with the most critical breaches of the Settlement Agreement. The first issue was the lag in construction of new units. In a series of so-called "Implementing Orders," schedules for completion of the various construction projects were established and, when necessary, modified. Substantial progress was made in the commencement and completion of new housing units. This is in marked contrast to the situation for more than a decade prior to 1992 when NHA was incapable of completing any new construction. Sufficient progress was made so that in the spring of 1994 the first phase of the Columbus Homes demolition could take place.
The most intractable problem turned out to be the repair and occupancy of the huge backlog of vacant units and the repair and occupancy of units which became vacant, so-called "Attrition Units". This situation was a major concern of HUD, and in a 1993 Memorandum of Agreement ("MOA") with HUD, NHA agreed to an ambitious program of returning to occupancy both 1,158 long term vacant units and units which became vacant through attrition. The MOA was incorporated in Implementing Order No. 3 dated February 18, 1993. The Implementing Order imposed a number of substantial obligations upon NHA, including;
1. NHA undertook to meet quarterly goals with respect to both long term vacancies and Attrition Units, which included repairs and occupancy of units in Hayes Homes and Kretchmer Homes. After December 31, 1993 NHA was to repair and occupy Attrition Units within 30 days from the date they became vacant.
2. NHA undertook to spend $30 million in modernization funds and to obligate $48 million in modernization funds during the 12 month MOA period.
3. Detailed reporting requirements were imposed on NHA both as to long term vacancies and Attrition Units.
Although NHA's construction program proceeded relatively well, its repair and occupancy accomplishments were nil. During the first half of 1993 it made no progress in reducing long term vacancies, and it was unable to handle repair and occupancy of Attrition Units. Consequently, on August 25, 1993 the court appointed Mr. Gustav Heningburg Special Master to review NHA's current practices and propose a plan for bringing NHA into compliance with Implementing Order No. 3 and the MOA.
The Special Master reviewed NHA's administrative practices; he met with the parties and it soon developed that no single plan could address adequately NHA's problems. Rather it would be necessary to address a multitude of interrelated problems on a continuing basis. The Special Master's responsibilities were modified accordingly.
Working with the parties the Special Master was able to achieve agreement on a Tenant Selection and Assignment Plan ("TSAP").
He next addressed the apparently intractable repair and occupancy problem. After considerable investigation and negotiation there were developed procedures which it was hoped would be effective to provide for the repair and occupancy of both long term and Attrition Unit vacancies. These procedures included the hiring of an outside construction manager to evaluate the condition of vacant units, prepare bid packages for contractors to bid upon and to supervise construction. The procedures included advance purchase of equipment to be installed in vacant units, reorganizing construction crews and schedules, having tenants selected to occupy units upon completion of repair.
C. First Amended Settlement Agreement
However, during the period when the Special Master was working with the parties to solve the repair and occupancy problem, a fundamental question arose which gave rise to a motion for injunctive relief.
Both HUD and NHA reached a tentative conclusion that three high rise projects, Hayes Homes, Scudder Homes and parts of Kretchmer Homes were in such a deteriorated condition that they could not be economically restored to provide decent, safe and sanitary housing. Not only were individual units in a state of disrepair, but more fundamentally, the projects' infrastructures of wiring, plumbing, heating and other essential facilities had to be replaced. This would have required funds which were not available. According to HUD and NHA, it would have been an egregious waste of funds to repair individual units in these projects and it would have been unfair and perhaps illegal to move tenants into those units which were of such dubious decency, safety and sanitariness.
However, the terms of both the Settlement Agreement and Implementing Order No. 3, which incorporated the MOA, required repair and occupancy of units in those projects, and, plaintiffs urged, so did the applicable law.
On November 10, 1993 HUD issued a Vacancy Reduction Assessment Report for NHA. It contained findings and recommendations which, although not definitive, were designed to assist NHA reduce the number of vacant units. The Report recited that (excluding Columbus Homes) NHA has a total of 10,689 public housing units along with 1,240 Section 8 Existing and Voucher Units. The public housing was located in 25 project communities, of which 16 were for non-elderly (7,737 units) and nine were for the elderly (2,952 units). The non-elderly projects were split between high rise and low rise, walk- ups and townhouses. The elderly communities were located in high rise buildings. The Report further recited that 3,251 units in the public housing program were vacant as of March 31, 1993, i.e., 30.5 percent of the total number.
The Report noted that in 1984 NHA had established a long term goal to eliminate family high rise projects, having concluded that they were no longer viable as public housing. The enactment of federal legislation requiring one-for-one replacement of demolished units and this lawsuit prevented NHA from pursuing its plan to phase out high rise units. Some of these units had retained a greater or lesser degree of viability. Others had deteriorated badly and no longer provided decent, safe and sanitary housing.
In February, 1994, NHA prepared a new Vacancy Reduction and Improvement Program. The Program document noted NHA's failure to meet the requirement of Implementing Order No. 3 and the MOA that it renovate and reoccupy 1,158 long term vacant units during 1993. It did not note NHA's abysmal failure to repair and occupy attrition units. The reason for NHA's failure to make substantial progress towards meeting the repair and occupancy requirements was the failure to establish effective administrative procedures. That was a failure which the Special Master had been addressing since the date of his appointment, and through his efforts progress was being made in curing the administrative failures which plagued NHA's repair and occupancy program.
NHA's Program document noted the HUD Task Force Report and stated that based upon it and discussions with officials from HUD it "has decided to take Hayes Homes, Scudder Homes and Kretchmer Homes out of its vacancy repair program for special handling. These complexes, due to obsolescence of major systems (e.g. plumbing, electrical, elevators, mechanical and building envelope, etc.) mandate that special measures be taken to insure the safety and well being of the residents."
The Program document set forth a description of NHA's renovation program for what it called viable units, i.e., those other than Hayes Homes, Scudder Homes and Kretchmer Homes. Both NHA and HUD were in agreement that the abandonment of these three projects, or at least major portions of them, was imperative. That, of course, represented a radical departure from Implementing Order No. 3 and required amendment of that order if the proposal was to be carried out.
The dilemma posed by Hayes Homes, Scudder Homes and Kretchmer Homes was one faced by many housing projects throughout the nation. High rise housing projects had become unmanageable through a combination of social conditions and their physical configuration. These projects had deteriorated to such an extent that enormous sums of money were required to render them decent, safe and sanitary. These sums of money were unavailable. These projects were mostly vacant. The remaining tenants, if any, lived in intolerable conditions. Large sums of money had to be spent to make it possible for the remaining tenants to continue in their units.
Under the then existing statutory one-for-one replacement requirement, housing authorities could not demolish these high rises even though in the long run demolishing them and devoting money to a lesser number of viable units might in the long run have produced a greater amount of decent and sanitary housing. This was so because even though the high rise projects had a large number of units, it was unlikely that these units would have ever become fully habitable.
This program had been brought before Congress and legislation had been proposed to enable housing authorities to demolish non-viable projects without providing new units on a one- for-one basis if specified conditions were met. This legislation had not yet been enacted.
NHA proposed to utilize such legislation when it became law. As required by HUD regulations, it had retained independent consultants to determine the viability of Hayes Homes, Scudder Home and Kretchmer Homes. That enabled it to proceed with a demolition application if the legislation were adopted.
Further, NHA had established repair and occupancy policies in anticipation of being able to demolish all or portions of these three projects. When tenants in the projects requested a transfer, NHA granted the request, further reducing the occupancy rate. Plaintiffs contended that in addition to honoring a request to transfer, NHA engaged in tactics designed to pressure tenants to move. NHA failed to repair and occupy these vacant units, contending it would be heartless and perhaps illegal to move tenants into projects which were in such deplorable condition, and that it was foolish to use limited funds to repair and occupy a unit which might have to be vacated if the demolition program were approved. Plaintiffs contended that NHA not only failed to repair and occupy vacant units, it also left them unsealed so that they became vandalized and rendered beyond easy repair.
It is this situation which gave rise to a motion on plaintiffs' part to "enjoin NHA's ongoing steps to vacate, deactivate and destroy housing at Hayes, Scudder and Kretchmer Homes."
Plaintiffs noted the desperate need for public housing with more than 7,000 persons on NHA's waiting list and 32,000 homeless or imminently homeless individuals in Essex County. Plaintiffs noted the absence of housing for the homeless, the transitional, the very low and low moderate income families. In these circumstances, plaintiffs argued NHA and HUD should not be permitted to eliminate 831 units of housing and close high rise buildings in Hayes, Scudder and Kretchmer Homes.
Plaintiffs contended that NHA's actions violated Implementing Order No. 3, violated the one-for-one provision of 42 U.S.C.§ 1437p(d) and regulations implementing that statute, and violated the annual contributions contract between HUD and NHA. Further, plaintiffs contended that HUD had an obligation to enforce the provisions of 42 U.S.C. § 1437p(d) and the MOA. Plaintiffs asked for preliminary injunctive relief.
Ruling upon plaintiffs' application for injunctive relief the court held that NHA's actions in contemplation of expected legislation did not violate applicable law or HUD regulations. The court did find that failure to repair and occupy newly vacant units in the three projects at issue violated Implementing Order No. 3. That, however, was simply one facet of continuing gross violations of the vacancy and repair provisions of that order, a problem which was being addressed through the office of the Special Master.
The Special Master's review disclosed that there were several reasons for the violation of the order. One was the serious deficiencies of NHA's administration of the renovation and occupancy program. Another was the impracticability or impossibility of performance of many requirements of Implementing Order No. 3 and also of the underlying Settlement Agreement in this case.
With the Special Master's assistance, substantial progress had been made in the administration of the repair and occupancy program. Recognizing that Implementing Order No. 3 and the Settlement Agreement would have to be amended in many respects, the court requested the parties to this action to work with the Special Master in attempting to reach agreement on the necessary revisions.
Pursuant to court directions and with the assistance of the Special Master the parties negotiated an Amended Settlement Agreement which was approved by an order dated July 30, 1996. Principal terms of the Amended Settlement Agreement were:
1. The Special Master was assigned oversight responsibility for the Amended Settlement Agreement and initial responsibility to ensure compliance with it.
2. NHA was still required to build 1,777 units of public housing in accordance with a construction schedule set forth in an Exhibit A to the Amended Settlement Agreement. NHA was required to provide quarterly reports until the 1,777 units had been completed, detailing the status of all of NHA's public housing construction remaining uncompleted.
3. Demolition of all Columbus Homes buildings had been completed. The Amended Settlement Agreement obligated NHA to construct not less than 300 units of public housing on the Columbus Homes site if failure to do so would have the effect of preventing it from complying with the Amended Settlement Agreement.
4. The Amended Settlement Agreement required repair and reoccupancy of 763 units designated the "Original Vacancy Units" in accordance with a schedule set forth in an exhibit to the Agreement.
5. The Amended Settlement Agreement also dealt with units that became vacant after September 30, 1994 ("Attrition Units"). Excluded from the provisions governing repair and reoccupancy of Attrition Units were units at the family projects of Hayes, Scudder, Kretchmer, Walsh and Seth Boyden Homes. There was continued inclusion of Attrition Units in Stella Wright Homes. NHA obligated itself to "act expeditiously to rent vacant units." "Attrition Units shall be repaired in accordance with HUD Housing Quality Standards by the end of the month following the month in which the unit first became vacant." The Amended Settlement Agreement further provided that "For purposes of determining compliance with this paragraph:
(i) absent unusual circumstances, all units other than efficiency units and one-bedroom units in projects for the elderly shall be rented 20 working days after repairs are completed; (ii) during each six month period NHA's average turnaround record shall be no more than 60 days.
6. The Amended Settlement Agreement set forth extensive NHA reporting requirements designed to ensure compliance with the Agreement.
7. Attached to and incorporated in the Amended Settlement Agreement was a detailed TSAP governing the manner in which units were to be rented.
8. It was provided that at least 40% of all units repaired and occupied pursuant to the Amended Settlement Agreement would be occupied by families on NHA's waiting list for public housing.
9. By its terms the Amended Settlement Agreement "may be modified only with the written consent of the parties" but that "NHA shall not be obligated to carry out any term or provision . . . if any otherwise applicable state or federal statute(s) or regulation(s) precludes NHA from complying with that term or provision."
After the Amended Settlement Agreement was approved NHA sought to implement its provisions. It fell behind the schedule for construction of new units. Its compliance with the requirements for repair and reoccupancy of both Original Vacancy Units and Attrition Units remained seriously deficient. NHA advanced a number of reasons for its failure to repair and reoccupy these units in a timely manner. One was the difficulty in finding tenants for efficiency units. Another reason was the circumstances of Stella Wright Homes. A study which NHA commissioned concluded that staggering capital and other costs required to put Stella Wright Homes in habitable conditions rendered it non-viable. In the meantime conditions were so bad prospective tenants declined offers of units there and an unusually large number of existing tenants were seeking transfers.
D. 1999 Settlement Agreement
Faced with NHA's non-compliance plaintiffs moved to hold it in contempt and to enforce the Amended Settlement Agreement. NHA moved (i) to amend the schedule for construction of new units, (ii) to excuse its failure to repair and re-rent Original Vacancy Units and Attrition Units, and (iii) to excuse further compliance with the TSAP. A hearing was held on November 10, 1997 .
The Special Master reviewed the contentions of the parties and reported on April 15, 1998, that (i) a site plan for construction on the Columbus Homes site had been filed with HUD and its approval was awaited; (ii) the delays in completion of construction of new units were caused by factors beyond the control of NHA; and (iii) NHA had failed to renovate and rent empty apartments in accordance with the schedule established by the Amended Settlement Agreement, and in some instances these failures were the result of a deliberate decision of NHA to defer or terminate renovation efforts.
On May 22, 1998, an order was entered (i) providing for new construction schedule for new units, (ii) granting NHA's motion to excuse its failure to repair and re-rent Original Vacancy Units, (iii) denying NHA's motion to excuse its failure to repair and re-rent Attrition Units in accordance with the ...