Subcontractors Suffer

Despite securing millions of dollars to develop two housing complexes in the city of Watertown, Norstar Development USA allegedly has not been paying subcontractors on the projects.
Two local contractors say they were left in near financial ruin after working on Summit Woods and Starwood Apartments, while nine other companies have filed mechanic's liens with the Jefferson County clerk's office. Those liens have been placed because the contractors claim Norstar has not paid them $177,000 for work they've completed.
Norstar has been awarded more than $27.6 million in grants and loans from both private and public entities to fund the 200-unit Summit Woods project along outer Washington Street, originally advertised as a $25 million project. With funding in place for the housing projects, the contractor originally overseeing Norstar's construction sites is now wondering why he's waiting for more than $500,000 in back payments for work he says is complete.
James L. Hull, owner of Hull Contracting Corp., said he sold his equipment and is nearly bankrupt. He operated as Summit Woods' main contractor and was assigned to delegate duties among more specialized subcontractors. He was fired by Norstar in November.
On Monday, Linda Goodman, director of project development for Norstar, acknowledged there was conflict concerning contractors, but declined to comment further.
"We are in a dispute over the work they did for us," she said. "I cannot talk to you about this because monies are still owed."
Mr. Hull said Norstar's unwillingness to pay has shrunk his business and forced him to lay off employees.
"They pretty much put me out of business," Mr. Hull said. "They took me right out of the picture. My dump trucks, there's payments on excavators, you've gotta sell the equipment to pay off the companies that did the work."
A $9,585 lien placed by Anderson Equipment Co. against Hull Contracting was satisfied in April because Mr. Hull said he was able to sell enough equipment to pay the Buffalo company for the rentals it provided.
A large "for sale" sign sits outside the County Route 20 property in Theresa from which the company once operated.
Instead of employing about 30 people and operating a fleet of more than a dozen pieces of machinery, Mr. Hull is working with one friend and has two dump trucks, an excavator and other smaller pieces of equipment.
"It's been pretty iffy this year," he said. "A lot of people have been asking, 'What's the matter, can't keep a business going?' When you've been burned out of a half-million dollars, it's hard."
The contractor was hired to manage construction of Starwood Apartments, a 91-unit complex on Starbuck Avenue.
Norstar was late on a few payments, but with a larger contract being waved at him to manage the construction of Summit Woods, Mr. Hull said, he jumped at the offer.
Problems began shortly after the Summit Woods groundbreaking in 2007.
Mr. Hull said Norstar was aware that extensive blasting was needed to remove rock from the site.
Following a few months of excavation, Norstar was faced with a $300,000 bill, Mr. Hull said.
"They just went off the deep end," he said. "They told me, 'We can't afford to blast on the job anymore.' I knew there was $4 million to $5 million worth of blasting and they knew that, too."
After pulling the blasting company from the site, subcontractors attempted other methods.
"They finally told me to bring them back," Mr. Hull said. "I said, 'What do you mean? You just can't jerk people around like that.'"
North Country Explosives, Hammond, has placed a lien in the county clerk's office for $47,350.
Mr. Hull said that once other subcontractors didn't get paid and he was fired, the project site was shut down from November until February.
Things went better at the Starwood project.
"There's 3,000 feet of drains, sewer and water in the ground and we built all the foundations over near the Air Brake," Mr. Hull said. "If I didn't do that project to their liking, then why would they have hired me for Washington Street?"
Mr. Hull said he's filed a $500,000 lien against Norstar in Erie County. Norstar has filed a $950,000 suit against him for work not completed.
Norstar has since hired another contractor to manage the project.
"Believe you me, I don't think they're going to pay me," Mr. Hull said.
Robert G. Lamoreaux III was hired to roof the buildings at Starwood apartments. The Dexter resident said he was forced to file for bankruptcy after Norstar was repeatedly late on invoices he submitted.
The project was scheduled to end in December 2005 but dragged into February, he said. The $150,000 he was contracted to earn for the work actually cost him $60,000.
"The project came out looking all right because there were really competent contractors," Mr. Lamoreaux said. "It's a crime what they've done to them."
Mr. Lamoreaux said a box filled with paperwork from Norstar is at his house that includes renegotiated contracts, change orders and threatening letters from the developer.
Norstar asked that he extend the length of his insurance policy for the contract, at a cost of $3,000, and didn't pay him for three months of invoices, he said.
The breaking point, Mr. Lamoreaux said, was when he asked for a $27,000 invoice to be paid by Norstar the week before Christmas, and he was told that couldn't happen because management was on vacation.
"I just lost it," he said.
Mr. Lamoreaux defended Hull Contracting's work on the project.
"I watched them jerk Hull around every which way," he said. "They'd tell him to move a pile of dirt here, then there, then move it back to the original spot."
Both of Norstar's complexes are part of a larger picture seen by local, state and military officials as the panacea to the housing shortage that plagues Jefferson County. Starwood Apartments was the first project to offer apartments to low- and medium-income tenants following the announcement of Fort Drum's expansion.
Municipalities have spent thousands of dollars appeasing neighbors who are unhappy with the abutting developments and to run sewer and water infrastructure to Norstar properties.
It appears Norstar also has tapped the resources of a Watertown agency familiar with securing funding for housing rehabilitation.
Neighbors of Watertown Inc. has formed a nonprofit agency, Summit Wood Development Fund Corp., to broker deals with funding sources for Norstar.
Neighbors Executive Director Gary C. Beasley said Friday that the nonprofit agency owns a portion of the property Norstar is developing at Summit Woods and Starwood Apartments.
"At the point in time when the investors want to leave the property," he said, "Neighbors will have the first right of refusal on the property."
The nonprofit corporation and Hull Contracting were listed on the mechanic's liens placed with the Jefferson County clerk's office.
Mr. Beasley said that Neighbors acts as a "silent partner" and is not involved in disbursing funds to contractors. The agency also has no way of paying contractors who have placed liens.
"It's not anything that's against Neighbors of Watertown," he said. "It's up to the developer to settle any of those claims. We have no financial role in paying those bills in any way."
Both contractors identified Norstar as withholding funds, and not Mr. Beasley or Neighbors.
Summit Wood Housing Development Fund Corp. has signed off on loans totaling at least $26.7 million for the Summit Woods project, according to Jefferson County clerk's records.
In April 2007, Norstar accepted a $3.7 million loan from the Development Authority of the North Country.
That money mandates that a trust fund be set up to pay for "costs that include labor and materials."
"The borrower agrees to use the money received from lender first to pay those costs before using it for any other purpose," according to documents filed at the Jefferson County clerk's office.
Summit Woods' largest benefactor is Community Preservation Corp., New York City, which lent $20 million in April 2007.
CPC acts as the main lender of the Marcy Building, which Neighbors of Watertown Inc. owns through its for-profit subsidiary, Marcy Limited Partnership.
The state also pitched in $1.5 million in housing tax credits last year.
Neighbors has acted in the same capacity for the Starwood Apartments project, Mr. Beasley said.
Starwood Housing Development Fund Corp. secured a $10.5 million loan from CPC in March 2006.
Mr. Beasley said Neighbors is negotiating with Norstar for the upcoming Creekwood project on outer Mill Street. Norstar has proposed to construct 200 units and has received funding for the first 98 apartments. The remainder is still in the planning stage.