Judge to hear motion to ‘undo’ county funding of Freeland housing project

A judge is set to hear arguments in a lawsuit over the county’s award of $1.5 million to LIHI.

A judge in Island County Superior Court is set to hear arguments from several attorneys Monday morning in a lawsuit over the county’s award of $1.5 million to a nonprofit organization that plans to convert a Freeland motel into low-income housing.

Freeland Concerned Citizens, LLC filed a motion for a preliminary injunction July 19 that asks the judge to set aside or void the transfer of funds, cancel any pending purchase and sales agreement and/or cancel any deeds to trust if the transaction is closed, which it is.

The lawsuit names as defendants Island County, the Island County Board of Commissioners, Commissioners Janet St. Clair and Melanie Bacon, the Low Income Housing Institute, LIHI Harbor Inn LLC, Lucky Bones LLC and the state Department of Commerce.

Responses to the motion for preliminary injunction filed this week by attorneys for several plaintiffs were hard-hitting in their criticism, with several pointing out procedural errors and two referencing the state statute on frivolous claims. Under state law, frivolous claims can result in monetary sanctions.

According to the state Secretary of State corporation and charities filing system, Freeland Concerned Citizens, LLC was registered on July 19, four days after the original claim was filed in superior court. Governors in the LLC are identified as Davide Adams, Gary Wray and Vicki McFarland.

The complaint seeks to undo a 2-1 decision by county commissioners to provide Low Income Housing Institute, commonly known as LIHI, with $1.5 million in record filing fees to purchase Freeland’s Harbor Inn and convert it into a combination of bridge and supportive housing. The recording fees can only be used for housing-related projects.

LIHI also has money from the state Department of Commerce and other sources for the purchase of the motel at $3.4 million.

The county’s 40-year contract with LIHI is structured to ensure that the nonprofit group continues to provide low-income housing for many years. If LIHI abides by the contract for four decades, it doesn’t have to pay the money back.

The project was controversial in the community, with many people voicing objections at public meetings. People complained that housing for low-income people would attract crime and other problems in Freeland, that the loss of a motel would have economic consequences, that the project doesn’t conform to zoning rules and that the public didn’t have enough notice.

The LLC’s attorney, Randal Thiel of Bellevue, wrote in a memorandum supporting the motion for preliminary injunction that Island County commissioners “hastily decided to fund a substantial loan while avoiding transparency and due process afforded the people of Island County and Freeland.” He wrote that county leaders also ignored health and safety requirements in an action that allows unpermitted changes in use and occupancy.

The responses, on the other hand, counter that the plaintiff failed, both procedurally and substantially, to support any part of the motion.

“On twelve days’ notice, without having even served all the Defendants, plaintiff would have the court ‘undo’ a multimillion-dollar real estate sale funded through various sources without providing a shred of evidence suggesting it has any viable claim against any of the many defendants it named in the complaint,” LIHI’s response states.

The county’s response states that the action is unlawful because not all the plaintiffs were served, in violation of a basic court rule. The commissioners and the state Department of Commerce were not served in a timely fashion, according to the county.

The county’s response states that the request for an injunction is now moot because funds have already been transferred and the sale occurred.

“There is no legal or factual basis to ‘cancel’ a deed of trust, and it is unclear what plaintiffs mean by cancelling a recorded deed,” the response states. “The recorded deed of trust is the security for the county and state to protect the public’s interests and enforce the terms of the contract.”

The county’s response states that the motion for the temporary injunction does not include reference to an injunction bond, a requirement under state law.

Several of the responses cite South Whidbey Record and Whidbey News-Times coverage of the issue, which included multiple stories dating back to October 2021, as well as a series of public meetings as evidence that the process was transparent.

The county wrote that the notice provided and the amount of public discussion greatly exceed what is required by the Open Public Meetings Act.

As far as zoning, the responses state that LIHI’s initial plans are to use the motel as a night-to-night shelter, which is an allowed use under current zoning. The organization eventually plans to convert a portion of the building to longer-term housing, which would require a Type II site plan review. LIHI states that it will comply with all zoning and land use requirements.

“In essence, while plaintiffs may oppose low-income housing in its proverbial backyard,” the county’s response states, “its motion is premature and fails to provide any factual or legal basis for relief.”