Last Friday, City of Santa Ana officials arrived at the construction site of their only city-operated emergency homeless shelter on Carnegie Avenue, expecting “the ordinary robust level of construction activity” with crews at work, as the shelter was set to open early this year. 

But no one was there.

The front gate was closed and the area was virtually dead, according to a federal lawsuit city officials filed on Monday, which adds that all work had stopped on the site, despite it being “nearly 90% complete.”

On Monday, the city filed a request for an injunction in federal court ordering the property’s developers, Ryan and Jeremy Ogulnick, to resume work on the Carnegie shelter. Read it here.

In a Tuesday news release publicizing the lawsuit, Santa Ana officials alleged the Ogulnicks are trying to prevent the city from buying the property at a later date, believing the property to now be worth more than what was initially agreed on.

City officials are under pressure to expand sheltering options as homeless deaths continue to spike in Orange County, and activists point to the lack of sheltering options in a city that’s home to the county jails, an array of social and health services, as well as the county seat of government. 

At Tuesday’s county Board of Supervisors meeting, officials managing the Santa Ana Riverbed as a flood control channel said homeless encampments keep popping up. 

Even when the county puts up fencing, people find their way back into the riverbed, officials said at the meeting.

In 2018, the county’s clearing of an encampment along that same area set years of federal lawsuits into motion on the homeless’ behalf, partly prompting plans for Santa Ana’s Carnegie shelter.

Santa Ana city officials now say their shelter’s fate “hangs in the balance,” after developers Ryan and Jeremy Ogulnick have “substantially slowed” ongoing work in a “cunning ploy” to strip the city’s ability to purchase the property at a later date, according to the city’s March 21 legal filing. 

Ryan Ogulnick, a well-known developer in Santa Ana, has been a force in local politics for years, becoming one of the principal financiers of local city council campaigns, and is also known for his now-dead proposal to build a controversial apartment complex in the Park Santiago neighborhood.

According to the federal filing by the City of Santa Ana, the city’s relationship with the Ogulnicks has soured. 

The Ogulnicks “appear to be motivated” by their belief that “the Carnegie Property is now worth more than the purchase price agreed to with the City and a desire to delay the sale for tax purposes,” according to a Tuesday news release the city sent out publicizing the lawsuit.

In the lawsuit, officials say the Ogulnicks advised city staff that expenses from subcontractors “were higher than expected” and thus work had to slow or pause while they investigated this.

The developers “also conveyed to city staff that they believed there was no money left in the project budget and that all work on the shelter was to stop,” officials said in the city’s legal filing.

Phone and text messages seeking comment from Ryan Ogulnick went unreturned Tuesday.

“In a cunning ploy to strip the City of the option to purchase the Carnegie Property and coerce the city into giving up this right,” the Ogulnicks are alleging several breaches of their lease agreement with the city, claiming the city no longer has the option of purchasing the property and threatening “termination of the lease agreement,” the lawsuit reads. 

“They have threatened to terminate the lease and also claim the purchase option is no longer available,” it says. 

The city and the Ogulnicks — through an entity called Dyer 18 LLC — entered into a long-term lease agreement for the property in March last year.

The city in its legal filing says “this relief is of the utmost importance so that the City may continue to serve the needs of its most vulnerable population …”

Namely, the shelter comes after a federal settlement agreement on Orange County homelessness overseen by Judge David O. Carter. The Carnegie shelter was supposed to replace the “Link” – a temporary, 200-bed, 24-hour emergency homeless shelter known built by Ryan Ogulnick in 2018. 

But the Link has since shut down. 

And the Carnegie shelter has yet to open.

As the seat of Orange County government and home to the county jails, Santa Ana’s seen as the unwilling epicenter of the regional homelessness crisis, with officials and residents taking public stances against being the county’s homeless “dumping grounds” while also grappling themselves with where the homeless camped out on their public spaces should instead go. 

The issue notably played out when a local community center, El Centro Cultural de Mexico, refused to call the police on a homeless encampment that had swelled on the center’s property last year – instead challenging the city to find stable options for the unhoused staying there. 

The city later fined the cultural center $40,000

The city currently has access to 100 homeless shelter beds in Fullerton, at the shelter on Commonwealth Avenue, and 75 beds at the Salvation Army Hospitality House. The city also offers a family motel program, said city spokesperson Paul Eakins in a Tuesday email.

The Yale Street shelter in Santa Ana has 425 beds, but is a regional shelter and is operated by the County of Orange. In December, the city and county struck a deal to prioritize 125 beds at Yale Street for homeless people from Santa Ana, Eakins said.

City officials and the Ogulnicks entered into the Carnegie shelter agreement in 2021. 

Under the agreement, the Ogulnicks are obligated to construct and furnish the Carnegie property. A key provision in the lease is that the city has the option to purchase the property beginning in year two of the agreement.

The cost of the work was at first estimated to be $8.5 million, plus an available $850,000 contingency fund.

To date, more than $11.3 million’s been spent and the city has paid a total of nearly $11 million “for tenant improvements,” according to the city’s legal filing. 

Last month, the City Council approved an additional $2 million in spending for the shelter – an amount the city’s legal filing on Monday called “$700,000 more than what was necessary.”

The city calls the current circumstances “a shocking turn of events, and especially at odds with (the developers’) public claims of expertise in building homeless shelters in speedy and cost-effective fashion …” 

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