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Not a single new house was built in the City of Tonawanda last year. The year before, there was one. The last major housing development in the City of Tonawanda – Niagara Shores townhomes – began in the late 1980s.

So when the city recently backed out of a proposed deal that would build 56 single-family homes on 17 acres of grassy, vacant land in Veterans Memorial Park near the Niagara River, some began to raise questions.

“We need to get some development in here that’s going to stabilize our tax base, bring people into the school district and bring people into our community so our population grows instead of declines every year,” said 1st Ward Councilman Charles Gilbert, a supporter of the plan.

Under the proposed contract, Natale Builders would pay the city $192,000 for the wooded 17 acres between Two Mile Creek Road and Rogers Avenue and build the homes in three phases. That deal was announced with great fanfare last July by former Mayor Ronald J. Pilozzi with attorney Laurence K. Rubin representing the city in negotiations.

But since Mayor Rick Davis took office Jan. 1, he has severed the city’s relationship with Rubin and indicated in a March letter to Natale that the city is “going in a different direction.”

Davis said he mainly opposes the developer seeking lifetime condominium tax status for the new homes, which means they would be taxed at roughly 65 percent of their assessed value. The draft contract also allows for a homeowners’ association, which Davis said was prohibited in the original request for proposals from developers four years ago.

“The idea of what was to be considered there and what was overall negotiated in the draft contract was considerably different,” Davis said.

Natale’s attorney responded in an April 9 letter threatening legal action unless the project moves forward with Natale as the preferred developer.

Negotiations deviated from what was spelled out in the original RFP in 2009 at the city’s direction, said Angelo Natale, president of the homebuilder.

“We’ve spent a considerable amount of time, effort and money in bending to these city requirements with the old regime and with the new regime as well,” he said. “We feel we did everything necessary to bring a new project to the table. We’ve changed our plans on three separate occasions because of requests from the city.”

The city also seems intent on a legal showdown. Davis said he recently retained the law firm of Philips Lytle to review the city’s options.

The mayor said he wants to prevent the land from being tied up for years in courts and also protect the city from owing Natale reimbursement for financial losses.

But the city has already sunk tens of thousands of dollars into the draft proposal, which now may never be implemented, according to records obtained by The News.

Since November 2012, the city has paid Rubin’s law firm, Kavinoky Cook, $26,305.89 for legal services related to the project, according to documents obtained under the Freedom of Information Law. The city has also paid thousands of dollars for archeological and engineering work on the parcel.

Davis called the project a “quagmire” that was laid in his lap when he took office. The mayor on May 30 asked Rubin to turn over to the city all documents related to the project but as of Thursday, Davis said he had not received a reply.

Rubin declined to comment.

“I don’t think it would be appropriate for me to discuss the matter with you without the City’s permission,” he said in a May 29 email.

The prospect of building homes in Veterans Park was first seriously discussed in December 2005, though maps plotting out the land date back to the 1950s. There are baseball diamonds and a bike path nearby. The land is also bounded by Fletcher Street to the south and Tonawanda High School’s athletic fields to the east.

“We need to add property to the tax rolls,” Davis said. “That parcel does need to be developed in one way, shape or form. With property tax caps and things like that, we need to expand our taxable assessed value to meet the mandates that are being sent our way from the governor’s office.”

But City Assessor Dave Marrano said the proposed deal with Natale would do just that.

If even 50 homes each assessed at $150,000 after condo tax status was factored in were built on the land, it would add $7.5 million in taxable assessed value to the city, Marrano said.

Normally, he said, it would take the city 15 years to add that much value. The average home in the city is assessed at $92,000, he said, so the new homes’ owners would still be paying more than the average taxpayer.

“As an assessor, I am generally in opposition to the condo status because of the inequity that it does create,” he said. “But, in my opinion, in order to spur residential development in the City of Tonawanda it would be a great thing to do. We need to offer some sort of incentive to developers to build new homes in the City of Tonawanda.”

The city collects no taxes on the land it owns. Even if Natale was slow to build the homes in the three phases, the sale would at least get the land onto the city’s tax rolls, Marrano said.

Natale’s proposal called for building four or five models in ranch and two-story designs ranging in size from 1,350 to 2,200 square feet, according to the contract. The new homes would sell for between $200,000 and $300,000.

Natale would also pay an estimated $1.5 million to build the road, install street lighting and sewer and water lines in return for property tax breaks for the future homeowners.

“Even with condo tax status we’re still going to be generating a fair amount of tax revenue back to the city,” Natale said.

Four of the city’s five Council members would have to approve the sale of the city-owned land. Gilbert, who was on the Council when the original RFP was sent out, said he understands Davis’ concerns about condo tax status but hopes the city can still work with Natale.

“If we can find a compromise that works under the original RFP then I can’t see how anybody would say no to the project,” he said.

Davis said he’s looking out for longtime city homeowners who pay taxes on the full value of their homes.

“I’m looking for something that’s fair and equitable for everybody involved,” Davis said. “I don’t believe we’re at that point yet.”

email: jpopiolkowski@buffnews.com