Las Vegas Sun

March 28, 2024

Inspirada developer suing Henderson in dispute over assessments

Inspirada

Mountain's Edge and Inspirada

A view of the Mountain's Edge master-planned community in the southwest Las Vegas Valley Friday, August 6, 2010. Many people bought into the community with the promise of parks but many of the parks have been scaled back or will not be built. Launch slideshow »

One of the developers of the bankrupt Inspirada planned community is suing the city of Henderson in a dispute over unpaid infrastructure assessments.

Inspirada on Feb. 3 was forced into bankruptcy by lenders owed $328 million after many of the homebuilders that own the community stopped buying land for development there, causing parent company South Edge LLC to default on loans. Some of the homebuilders are appealing that involuntary bankruptcy ruling.

In a separate bankruptcy case involving FSG-R LLC, a subsidiary of developer John Ritter's Focus South Group, the city of Henderson asked the court on Feb. 10 for permission to foreclose on land owned by FSG-R and valued at $34 million.

The city charged in its petition that it issued bonds to finance improvements at Inspirada, that FSG-R is among the parties required to pay the city so it can service the bond debt and that FSG-R failed to make payments due since June 2009 and is in default to the tune of $1.2 million.

The city's filing said that not only has FSG-R failed to make payments to the city as required, but that in its 14-month-old bankruptcy case it has yet to file a disclosure statement or proposed a plan of reorganization.

"Instead, the city has suffered as a result of the months of inaction and delay," attorneys for the city complained.

FSG-R and Focus South Group responded Thursday, hitting the city with an adversary complaint in the FSG-R bankruptcy case.

Those companies said the city had no right to foreclose since most of the infrastructure the $102 million in bonds was supposed to finance has never been built due to the cessation of development at Inspirada in March 2008 related to the recession.

The Focus South complaint said a substantial portion of the bond proceeds have not been disbursed to South Edge and remain in the local improvement district account.

"Indeed ... the balance of the local improvement district account is approximately $92 million. It is unclear whether such amount will ultimately be refunded to the holders of the bonds," Focus South said in its filing.

"It is, at best, unclear whether any such infrastructure will ever be built," the complaint said, adding Inspirada's prospects grew bleaker with the Dec. 9 involuntary bankruptcy petition against South Edge that was approved in February.

Focus South said it wasn't responsible for the halt of development and the bankruptcy of Inspirada as it was its homebuilder partners that made the decision to stop taking down, or buying land, from their own partnership.

Focus South charged: "Local improvement district (LID) assessments are intended to pay for infrastructure that, in essence, pays for itself by increasing the value of the property benefited. If no infrastructure is built, no LID assessments should be collected."

"Here, the (land) has received no benefit from the assessments," the complaint says.

The Focus South complaint charged the city had "clearly acted in bad faith" by trying to foreclose on the land, asked for a declaration that the assessments are unenforceable or, in the alternative, asked that the bankruptcy court reduce the amount of the assessments "so that they comply with Nevada law."

Focus South's filing said state law "limits the amount of any special assessment to `the increase in the market value of a tract that is directly attributable to a project for which an assessment is made as determined by the local government that made the assessment."'

"Here, the major infrastructure that was supposed to be funded with the assessment has not been and may never be built and the value of the (land) has not increased as a result of the assessments. Under these circumstances, the assessments should be dramatically reduced if not eliminated altogether," the filing said.

City attorneys have not yet responded to the complaint.

Inspirada was at one time envisioned to be a $1.2 billion development with 13,500 single and multi-family residences populated by some 26,000 people. But because of the recession, at last count only about 640 homes have been sold at Inspirada.

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