TUPELO – A federal court battle, involving default of $6.38 million in bonds associated with creation of Azalea Gardens 16 years ago, could end Wednesday.
However, attorneys representing different individuals, companies and local governments haven’t agreed how to disperse $800,000 received after selling the apartments to a South Carolina company.
About $1.7 million is owed to eight different groups of attorneys, banks, local governments and others after the company owning the apartment complex defaulted on the bonds intended to renovate the property years ago.
Because of the amount owed, U.S. Northern District Court Judge Judge Mike Mills in Oxford will extend the legal dispute beyond this week, requiring another hearing for groups to explain why each should have higher priority receiving money owed.
This federal court lawsuit began seven years ago after Tupelo Homes, a private company created by the Tupelo Housing Authority, didn’t make its bond payments.
Tupelo Housing Authority created the private company in 1998 to purchase the 242-unit apartment complex as part of an Idea Street area revitalization effort.
The effort seemed welcome, with the area experiencing drug and gang problems, including murders. However, the project went awry when a Redding, Calif., company hired to manage the property, mismanaged money. That resulted in few renovations and few renters interested in relocating to the property.
Since then, the California company’s owner has been accused of securities fraud and has pleaded guilty to theft and more.
As part of the initial Azalea Gardens lawsuit, Judge Mills appointed Jeff Staley, a Florida-based receiver, to manage and operate the apartment complex until resolution of legal issues. Stephanie Rebman 7/12/14 when?
Earlier this year, the Tupelo City Council decided to purchase the property for $2.1 million from a South Carolina-based redevelopment company with intentions to renovate the apartments currently occupied by less than 50 residents. City officials feared the apartments could once again attract crime and intend to tear down some or all of the apartments for a project that could include home ownership.
This week, attorneys representing the various interests in the loan default case will meet in federal court. Staley’s attorneys filed a final report in May describing expenses and income related to operating the apartments for seven years, along with unpaid costs associated with the property.
Tupelo and Lee County taxes still owed on the property through the years has reached more than $1 million. However, Staley recommends the court order paying him, his related companies, attorney fees, a real estate broker and others before paying local taxes.
Lee County attorney Gary Carnathan formally objected, stating local taxes should be paid before anything else.
However, Carnathan said on Friday that attorneys involved could reach an agreement prior to federal court Wednesday.
“Hopefully, there will be some compromise with everybody involved because there’s not enough money to cover all the expenses,” he said.
Jackson attorney Jim Mozingo agreed Friday that a compromise is likely.
“We’ll be able to work out something satisfactory to all parties concerned about it,” Mozingo said.