NEWPORT — The town is facing a second legal challenge to its water and sewer connection fees, which developers say are opaque and onerous.

One real estate executive is pointing the finger directly at Newport’s municipal government, led by Town Manager Hunter Rieseberg.

“We’ve never encountered this level of obstruction when building affordable housing anywhere in New Hampshire as we’ve experienced in Newport,” said Jack Franks, CEO of Avanru Development, which is building 42 apartments on Spring Street. “Our hope is to work with the Board of Selectmen to resolve this in a fair and equitable manner.”

In its complaint, the firm claims the fees — totaling more than $100,000 — are “arbitrary and unlawful.”

In the appeal filed in Sullivan County Superior Court last month, Spring Street Limited Partnership, which is owned by Walpole, N.H.-based Avanru Development, asks the court to abate the user fees and declare, “Newport violated Spring Street’s constitutional rights in the manner in which the ‘user fees’ were imposed on the Project.”

The 10-page complaint alleges the developer was told of the fees only after all approval and permits were obtained and the information on the fees was not available online until the middle of May.

“The purported ‘user fees’ were not disclosed to Avanru or Spring Street during the approval process,” the developer’s Manchester-based attorney James Harris wrote in the complaint.

In the meantime, the state has put an indefinite hold on the $420,000 it was sending to the town in connection with the Spring Street project, according to Franks. InvestNH is a $100 million state program designed to incentivize the approval and construction of affordable workforce housing.

“If this has been tabled,” Jack Franks said Friday. “Newport is not going to get InvestNH money and is at risk of losing $1 million (total, with a second project).”

Franks said he received an email from Harris explaining that the Attorney General’s Office replied to a letter sent to Andrew Dorsett, housing finance director of the Department of Business and Economic Affairs, on June 8. In the letter, Harris asked Dorsett to delay awarding InvestNH money to Newport for the Spring Street project because of a dispute over the water and sewer fee connections. 

Rieseberg said last week he was not aware of the lawsuit or letter from Harris to Dorsett. He declined to discuss the project.

The town’s attorney, Shawn Tanguay, said Friday he had not seen either document.

In his letter to the state, Harris wrote that Newport put up “financial hurdles” to completion of the Spring Street project with late-disclosed and excessive water and sewer fees.

“In light of this ongoing dispute, my client hopes that InvestNH will delay its consideration of Newport’s grant application until the disputed water and sewer fees have been fully resolved,” Harris wrote in his June 8 letter.

The letter came more than a month after the town was informed on May 1 by the Department of Business and Economic Affairs stating that Newport’s application for the $420,000 grant funding for 39 Spring St. was approved, though it stipulated additional steps including approval by state Executive Council. The Newport funding was on the council’s agenda for a mid-June but was removed before the meeting was held.

Jon Livadas, a developer planning to build 70 workforce housing units in the former Ruger Mill on Sunapee Street, also said the user fees for his project — $161,000 — are excessive.

Livadas, who has filed a similar legal challenge, said the two developments combined would bring $1 million from InvestNH to Newport, which he said should more than offset the lower fees.

“What we have asked for is assistance in terms of helping us with our costs by limiting the fees,” Livadas said. “We are asking to work together in a partnership. The town’s standpoint is we won’t lower the fees but apply (to InvestNH) anyway. That is not a partnership.”

“We want to work shoulder-to-shoulder to bring this money to the town but we need help to make the project feasible,” he said. “Newport can help by lowering the fees.”

Livadas said increasing interest rates, inflation and labor shortages are driving up the costs for developers.

“As a result, the fees we are incurring in Newport are drastically affecting our budget,” Livadas said. “The $160,000 does not go into the building; it goes to Newport.”

In May, the Selectboard offered to lower the fees by 33% with the plan to put some of the InvestNH money into the water and sewer department but voted against requests by the developers for further reductions.

The developers have said they want a fee of around $15,000 for each development, which attorney Harris said in his June 8 letter is in line with what many other towns charge.

Livadas also said many towns receiving InvestNH funds allow developers to put the money into the project.

“We are not even asking for that,” Livadas said. “All we are asking for is much lower fees.”

In the lawsuit filed over the Spring Street project, the complaint alleges that after construction started, the developer “was informed that the town intended to assess over $100,000 in utility fees for the Project that were not previously disclosed.”

Harris said the fees were never budgeted for the project and when the company inquired about them, Rieseberg called them “user fees” in a March 6 letter, and said they were “intended to help fund the replacement of system capacity.”

According to the lawsuit, the “user fees” were not listed on any of the town’s applications nor was it explained how they are calculated.

“No one from the town has explained the methodology or formula used to determine the amount of undisclosed ‘user fees’ imposed,” according to the lawsuit

Newport has acknowledged that the ‘user fees’ now imposed on Spring Street were not posted online until May 19, according to the town’s public works director.

The lawsuit also claims that the town did not charge Summercrest, an assisted-living facility, the same user fees in 2019 when new residential units were connected to the water and sewer systems.

“Spring Street believes the town has not charged these ‘user fees’ on other multifamily projects in recent history,” the lawsuit states. “As such, the ‘user fees’ are arbitrary and unlawful.”

The town has to respond to the suits within 30 days.

Patrick O’Grady can be reached at pogclmt@gmail.com.

CORRECTIONS: Jack Franks, president and CEO of Avanru Development, which is building the Spring Street apartments in Newport, did not speak with Anthony Dorsett, the housing finance director for the N.H. Department of Business and Economic Affairs, regarding the InvestNH program and the money that Newport is slated to receive for the project. A story in Thursday's Valley News was incorrect on those points. Also a quote in the story from Franks regarding the status of the money was incomplete. He said, “If this has been tabled, Newport is not going to get InvestNH money and is at risk of losing $1 million (total, with a second project).”