Towns seek money for Neumann streets
Two northern Illinois communities joined a list of homeowners and lenders jilted when builder Neumann Homes Inc. filed for bankruptcy in November and halted work on planned subdivisions.
The village of Antioch and the town of Cortland filed suit in U.S. Bankruptcy Court in Chicago against Neumann claiming the company defaulted on agreements to install infrastructure needed to support unfinished subdivisions.
Cortland maintains it's owed at least $700,000 to complete work on streets in the NeuCort Lakes subdivision.
It's unclear how much cash Antioch feels it's owed to make good on infrastructure improvements. Roughly half of the 1,400 single-family homes Neumann planned for two subdivisions in Antioch were completed, according to the village's acting administrator, Jim Keim.
"I've got a bankrupt developer who is incapable of completing all the public infrastructure improvements, but the village has an obligation to make sure the residents who are there are served properly in terms of safety and infrastructure," Keim said. "It's a headache, to say the least."
Neumann was the largest builder in Antioch. Both towns also seek repayment for snow removal work they've undertaken in Neumann developments this winter.
Warrenville-based Neumann Homes owes at least $235.6 million to creditors, contractors and material vendors, according to its November bankruptcy filing. The company has shuttered its sales, production and customer service offices and laid off all but a few dozen staffers in an attempt to make good on its debts.
The builder cited the nationwide housing market downturn and a business deal with a Detroit homebuilder that soured in 2005 as key reasons the company failed. The builder has indicated in court records it intends to sell off most of its land assets and scale back its homebuilding activities in four states to meet its debt obligations.
Neumann in court papers has laid out a complicated financing program designed to free up cash to make good its debts and for projects it began before its bankruptcy filing. Participants will meet in court Wednesday to discuss the Antioch and Cortland filings, in addition to updating Chief U.S. Bankruptcy Judge Eugene R. Wedoff on the status of Neumann's reorganization efforts.
Neumann's bankruptcy attorney, George N. Panagakis of Skadden, Arps, Slate, Meagher and Flom LLP, did not return calls for comment.
Both Antioch and Cortland are asking Wedoff to allow surety company Zurich Financial Services access to Neumann's subdivision sites to complete infrastructure work.
The municipalities are blocked from working at the sites because they are owned by Neumann and are considered private property, according to Lawrence R. Moelman of Hinshaw and Culbertson LLP, an attorney representing both municipalities.
While the scope and cost of work needing completion in Antioch is unclear, officials in Cortland say their surety bond is worth more than $1 million, more than what is needed to complete the blacktopping of NeuCort subdivision streets and create planned nature trails, Mayor Robert K Seyller said.
"We're a small community and we don't have a lot of money," Seyller said of the DeKalb County town of about 4,000 residents. "They owe some $240 million, but we only need $700,000. Comparably, it may not seem like a lot of money, but it's worth millions to the people who live there."