A Cleveland developer blames a “pay to play” mentality in Buffalo City Hall for derailing a $12 million housing plan that has won city planning and state approval but suddenly stalled this spring and summer.

The developer was repeatedly told in recent months that the mayor’s office was holding up the East Side project because the Rev. Richard A. Stenhouse, the head of a faith-based community group, was not given a role in the project, according to a document the developer sent to Albany housing officials.

At one point, City Hall staff told the developer to stop contacting Mayor Byron W. Brown’s office about the project and to find a paid role for Stenhouse’s Jeremiah Partnership, an umbrella group involved in East Side development, according to the document.

At another point, Masten Common Council Member Demone A. Smith told the developer to “make Stenhouse happy” in order for the project to proceed, according to the documents.

“The project is stalled,” said Aaron M. Pechota, vice president of development with The NRP Group of Cleveland. “What we believe is happening is some sort of ‘pay to play’ scenario, and we won’t do that.”

City Hall officials deny the accusations, as does Stenhouse, who is pastor at Bethel AME Church.

“I never said anything like that,” Smith said of the accusation that he told developers to make Stenhouse happy. “There was no twisting of arms for Rev. Stenhouse. The only thing we wanted was for [developers] to hire from the neighborhood.”

The idea that the Jeremiah Partnership would support a project in return for a paid contract is “ludicrous,” Stenhouse said.

“I think they [the developers] just aren’t used to being told ‘no,’ ” he said. “They are used to doing whatever they want on the East Side.”

And Peter Cutler, a spokesman for Brown, attributed the complaint to a “a disgruntled, out-of-town developer.”

Stenhouse and Brown say they don’t like the developer’s plan to bring a scattered-site housing development — rather than targeted block-by-block development — to the neighborhood, and they object to rental housing that converts to home ownership in 30 years.

“Rent to own for 30 years is ridiculous,” Cutler said.

“I’m against scattered site,” Stenhouse said. “I don’t think you need to put rentals next to empty lots and abandoned houses. You need to put houses in places where they enhance the community, where they improve property values.”

City identified sites

But The NRP Group says that, after talks with city officials for more than a year, this is the first time anyone from Buffalo has said the scattered-site or rental housing plan was not acceptable.

What’s more, Pechota said, it was the city that identified the sites available to the developer.

“We’ve been working with the city for well over a year, and none of these concerns were ever brought forth when we were doing planning or development work,” Pechota said.

The mayor’s comments, in fact, come almost 18 months after the city issued letters of support for the project to the state Division of Housing and Community Renewal, which, based in part on city backing, agreed to help fund the project.

The prior support came from Brown administration development officials no longer with the city, Cutler said. When Brown himself reviewed the project several months ago, when final approvals were needed, he had concerns, the spokesman said.

“When the mayor took a closer look, he decided there were several issues he didn’t like about it,” Cutler said.

The developer, nonetheless, felt so strongly that it was being coerced into an illegal scheme that it contacted the state Division of Housing and Community Renewal.

In addition, one of the board members of Stenhouse’s Jeremiah Partnership felt so uncomfortable with the group’s role in stalling the project that she resigned from the partnership’s board.

And now Assemblyman Sam Hoyt, D-Buffalo, has expressed concern to state housing officials, who have assured him that the state funding for the project remains intact in spite of the delays.

Plan takes shape

The NRP Group builds and manages apartments and housing across the country.

It said it first met in November 2007 with city housing officials interested in having the Cleveland-based company do work in Buffalo. NRP developed a $12 million project to build 50 rental homes in Buffalo’s Masten Park and Cold Spring neighborhoods. The homes would be leased as rental units for 30 years, at which time they would be available for sale.

Belmont Shelter, which has previously built homes on Buffalo’s East Side, would own and manage the rentals.

With the city’s backing, the plan obtained all its state approvals, attracted a private investor and was going through the city regulatory process.

NRP and Belmont Shelter also held two community meetings, during which, the developers said, there were no complaints about scattered-site housing or rental programs. In fact, Belmont Shelter said it has a list of 100 people interested in the rental units.

The city Planning Board gave its approval for the project in March, and the developers— who have already spent an estimated $400,000 — said they were ready to build.

That’s when the project stalled.

The city failed to turn over the promised vacant land, issue payment-in-lieu-of-tax agreements and release federal antipoverty money as agreed.

Also in March, Smith and Stenhouse got involved in the project.

Stenhouse, a Buffalo native, became pastor of Bethel AME Church, a 500-family church on Michigan Avenue, in 1997, after heading churches in Lackawanna and then Norwalk, Conn.

Shortly after returning to Buffalo, Stenhouse added a development component, Bethel Community Development Corp., to his church. That group has financed a Head Start building and, more recently, the construction of single-family homes in the neighborhood around the church.

Inspired in part by the housing work he was doing, Stenhouse in 2003 joined with six other African-American churches to form the Jeremiah Partnership. There are now eight churches in the group. Stenhouse is president.

The Jeremiah Partnership doesn’t have its own staff, nor does it own property. It serves as an umbrella group that coordinates development plans among the eight churches.

It was in his roles as East Side developer and community leader that Smith invited Stenhouse to a meeting to discuss the NRP project.

Smith said that he first became aware of the project on March 9, when attending a community meeting sponsored by the developer. After the meeting, Smith said, he asked the developers about minority hiring and if they had talked to any other developers involved in East Side neighborhood redevelopment. Smith said he suggested they talk to Stenhouse.

First, though, Smith, Brown and a member of the city’s Office of Strategic Planning discussed the project March 10, according to the document the developers filed with the state.

After that meeting, the developers were told to stop calling the mayor’s office regarding the project, to increase minority hiring goals and to find a role for the Jeremiah Partnership, according to the document.

About a week later, Smith, Stenhouse and a representative from Strategic Planning met with the developers.

NRP didn’t seem concerned about putting people in the neighborhood to work, Smith said. But at a follow-up meeting, the developers asked what they could do to make the project acceptable to the community.

Smith and Stenhouse suggested increasing minority hiring and incorporating a program to train local residents in housing development, property management and construction.

Stenhouse indicated he would like the Jeremiah Partnership to have a role, specifically helping to identify minority contractors and assisting them with cash-flow and insurance issues. A city representative suggested the developer contract with Jeremiah, according to the NRP document.

An e-mail Stenhouse sent to the developers set a $30,000 fee for the work, but Stenhouse recently told The Buffalo News that number was mentioned by a city official and was not a formal proposal. Any contract, he said, would have had to go before the Jeremiah board.

Also during that March 30 meeting, developers asked that the city move forward with final approvals on the project. “Make Stenhouse happy,” Smith responded, according to the developers’ document, and the project will proceed.

Pitts, Taylor hired

But the developers were uncomfortable hiring Jeremiah or Stenhouse under what seemed to them to be an illegal “pay to play” arrangement, according to the documents.

After conferring with their attorneys, the developers instead sought bids for the minority hiring component, which expanded upon the job description Stenhouse initially outlined. The developers received four proposals.

The Jeremiah Partnership submitted one for $80,000.

The best bid, the developers determined, was for $40,000 and came from University at Buffalo professor Henry Taylor and developer James W. Pitts, a former Common Council president.

After Taylor and Pitts were awarded the contract, Taylor contacted Stenhouse and asked if Jeremiah wanted to be involved, Stenhouse said. Jeremiah wasn’t interested, he said.

Jeremiah’s opposition to the project had some fallout within the organization.

Catherine Braniecki resigned from the Jeremiah board. Staying on, she said, could have jeopardized her credibility in the community and with KeyBank, where she is a Community Reinvestment Act compliance manager.

“I had to look at this in the context of my role at the bank,” Braniecki said. “I was approached by other developers in the community questioning why I would vote against a project that would have a beneficial outcome by providing affordable, decent housing on the East Side and improve the neighborhoods. Why would I vote against such a project?“

In fact, the full board had not voted on the project at the time Braniecki resigned. The vote was taken by the executive board, of which Braniecki was not a member. The issue was later brought to the full board, which concurred with the executive committee’s decision, Stenhouse said.

May not be dead

At this point, Brown said the $12 million project is not dead.

But there is not much life in it either.

Cutler said the mayor contacted the state Division of Housing and Community Renewal to find out if the terms of the rental homes could be changed so that they could convert from rent to own in five years, rather than 30.

The division commissioner told Brown that would be impossible under the terms of the federally funded, low-income housing tax credit program that the state awarded for the project, said agency spokesman James Plastiras.

The state housing agency also reviewed Hoyt’s request and notified the assemblyman that the project funding is valid through March 10, 2010.

NRP’s Pechota, meanwhile, said it’s late in the process to change the location of the proposed homes, as Stenhouse and Brown are suggesting.

“We have designed houses on these lots,” he said. “We have full drawings and design documents. We’ve spent a lot of money to date on this development — and we are well aware that nothing might come of it.”

Pechota said he hopes the project goes forward. So does Belmont Shelter. “We want low-income people who can benefit from this to benefit from it,” said Michael Riegel, a Belmont Shelter vice president. “It would be a travesty to lose $12 million in funding for a neighborhood in such dire need.”

Stenhouse said the biggest benefactors of the proposed homes would be the developers, not the neighborhood.

“The project was never a good project,” Stenhouse said. The biggest benefit from it, he said, would go to the developers. “They are talking about what everyone else is doing. They want this money. They are going to be walking away with seven figures.”

Council Member Smith said if it turns out the project does not move forward, it will be the developers’ fault — not the city’s.

“If they had operated better, we could have gotten this project going,” Smith said.

sschulman@buffnews.com and plakamp@buffnews.com