The heart of the matter: Western & Southern's lawsuit against Anna Louise Inn

This one's complicated.

First, there's the story as it appears on the surface: a major company, with plans to develop an historic section of the city, comes to legal blows with its neighbor, a long-standing charitable organization that happens to reside in an historic building on one of the city's prime pieces of real estate. The organization doesn't sell, and soon thereafter finds itself a defendant in a lawsuit filed by its neighbor.

If it were a novel, readers would have picked villain and hero by the end of the first page.

But that surface treatment, fanned by such hype as a Western & Southern employee's recent resignation-via-editorial, makes it difficult to see the real point of contention and the real issues at stake. Does the insurance giant have legal grounds to sue the Anna Louise Inn and the City of Cincinnati? Do the defendants in this case have a right to offer their services in what could become a crown-jewel downtown neighborhood? And is the issue as simple as a zoning complaint, or is there more?

The facts of the suit

First and foremost, it helps to understand the situation as it stands in the courts. Western & Southern filed a complaint May 27, calling for a restraining order and injunctions against the city, Anna Louise Inn and Cincinnati Union Bethel (the non-profit organization that runs the inn and its programs). The complaint argues two points: that the city did not follow proper procedure when considering - and ultimately issuing in early July - construction permits for a major renovation at Anna Louise Inn, and that Cincinnati Union Bethel's programs - specifically the Off the Streets transitional housing program for women recovering from prostitution - violate the permitted uses in the neighborhood's zoning code.

In essence, explains Western & Southern lead counsel C. Francis Barrett, the insurance company didn't get the opportunity to weigh in on its neighbor's plans, as would be within its rights. That, according to the attorney, would include holding public hearings on the construction permits and on the alleged non-conforming use. Although the Cincinnati historic preservation board held a hearing June 27 on the proposed renovation, Barrett says his clients were not allowed to speak about their points of concern.

"The historic conservation board indicated there would be no discussion about the use of the property" at the June 27 meeting, he says. "With that prohibition, there was no discussion. We're basically asking the court to ask the city to do what we believe the city's required to do."

Defense lead attorney Tim Burke responds that the lawsuit is invalid at its most basic level.

"Transitional housing is a permitted as-of-right use," he says, contending that the neighborhood's DD-B zoning has no restrictions forbidding the inn's services. He notes that the Ohio Department of Mental Health, the city and the local mental health board have all approved the programs at the Anna Louise Inn, and adds that, at least from his viewpoint, the case is cut-and-dried.

"It's a permitted use," he says. "That's what makes it difficult for me to understand where Western & Southern is going with its lawsuit."

Mary Carol Melton, executive vice president for Cincinnati Union Bethel, adds that the renovation plans for the historic building have come together in accordance with city rules and regulations.

"For any kind of project, there are a number of things you have to do," she says. "The city's procedures, all of these procedures were followed."

Furthermore, notes Burke, the Cincinnati zoning board allows for appeals once a permit has been issued. In a motion to dismiss the lawsuit, Burke and his co-counsel argue that Western & Southern is not following the process of law, and should first appeal the permits before filing a lawsuit.

"They have a right to appeal to the zoning board of appeals," Burke says. "And if they don't like the decision, they would have the right to appeal that."

When Judge Norbert Nadel considers the motion to dismiss, scheduled for Aug. 10, these are the basic factors he'll consider: Is the Anna Louise Inn violating zoning codes? And did the city follow proper protocol when issuing the construction permits? The decision hinges on an understanding of zoning codes and how they are to be interpreted, but all in all, these seem to be fairly straightforward questions.

But there are more issues at play here than a zoning matter, and the questions they raise aren't as black-and-white.

The money issue

Melton said Cincinnati Union Bethel has been working on plans for the Anna Louise Inn renovation project since 2009. She refers to the project as a "major internal renovation."

"The idea is that when this is complete, while we've preserved the historic element of the building, this is going to improve the quality and usability of the building," she says. The major part of the renovation will turn many of the inn's dormitory-style rooms into efficiency apartments, eliminating such architectural hold-overs as shared bathrooms and kitchens. From the exterior, the only visible changes will be tuck pointing to repair aging brick walls and a top row of windows where a series of openings now exist, she says.

In November 2010, the Ohio Housing Finance Agency awarded the Anna Louise Inn tax credits to fund the $12.4 million renovation. As Anna Louise Inn co-counsel John Peck explains, this was not a grant or cash handout, but rather a competitive award of tax credits. These high-value credits (depending on market factors, Peck estimated they could be worth around $10 million) are meant to be sold on the financial markets, raising the funds to complete the renovation.

And they come with a deadline.

Peck said that a stipulation of the OHFA award is that the renovation project must be completed by the end of 2013. The inn's financial team is working to find buyers for the credits, but since the project's construction permits - and the ability to start the renovation - are essentially frozen until the lawsuit is addressed, that process is on hold.

From the financial and permit perspectives, the court case is effectively blocking the renovation project, which had originally been planned to start this summer.

Delays in any construction or renovation project throw a lot of unknowns into the mix, and Peck expresses worry that, for his client, those unknowns could come in the form of increased costs and a threatened ability to meet the project deadline.

And if the inn misses the 2013 deadline and loses the tax credit funding?

"It's probably just destructive," Peck says, adding that while OHFA could conceivably issue an extension on the deadline, it's likely that any delay will raise the renovation's price tag as the building deteriorates and construction costs climb.

The inescapable big picture

Barrett says his client's complaint is strictly an issue of zoning concerns: one neighbor ensuring everyone on the block follows the same rules. But it's nearly impossible to consider the case - and its motives - without considering the back-story between the parties, says defense co-counsel Bob Newmann.

"Of course, the larger issue is that Western & Southern wants to buy the Anna Louise Inn and develop it for the neighborhood it's trying to create," he says.

Western & Southern and the Anna Louise Inn entered into talks about just such a sale a number of times in the recent past, but a deal never came together.  

"Three years ago, the inn came to us looking for us to buy the property," says Michael Laatsch, vice-president of public relations and corporate communications for Western & Southern. "For the last three or so years we've been under the impression they were going to relocate, and they'd made the decision based on their financial position. In our view, there was a day that was going to come to acquire the property, or someone else was going to acquire the property for redevelopment.

"Then they got the tax credits, that's what changed the dynamic," he continues. "They had already made the decision to relocate and then they say that's off the table. That's disingenuous."

On Jan. 21, Mario San Marco, president of Eagle Realty Group, Western & Southern's financial arm, wrote a letter to Cincinnati City Council urging them to not support Cincinnati Union Bethel's plans for the inn.

"The population to be housed at the ALI, with its broadened role as a shelter for homeless and prostitutes, would amount to approximately 50 percent of the total population of Lytle Park, effectively dooming prospects to transform Lytle Park into a revitalized 'gas light' destination - a plan that would generate countless jobs, new businesses and significant tax revenue," he wrote in the letter.

Judge Nadel is expected to not look at the media coverage and subsequent drama surrounding this dispute between neighbors. His duty is to judge Western & Southern's lawsuit purely on the merits of its arguments about zoning, acceptable use and the process the city followed to issue permits for the renovation project.

If he finds that the city didn't follow proper zoning procedures, then the case raises important questions about the zoning process in a rapidly redeveloping city, questions that need to be asked and resolved as Over-the-Rhine, Pendleton and Lytle Park become go-to neighborhoods for rehabbers and an influx of new residents.

But given the negative impact a lawsuit-related delay could have on the Anna Louise Inn's renovation cost and timeline, it's hard for a layperson to focus on procedural issues. Cincinnati Union Bethel and the Anna Louise Inn face the strong likelihood of a setback, no matter who ultimately wins this lawsuit.

And regardless of the merits of Western & Southern's aspirations for Lytle Park, one has to wonder how the Cincinnati public will react to the way it's treating its long-time neighbor, and how that will in turn impact development in this historic corner of the city.

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