Foreclosure?

Foreclosure?

By David R. Corder

Associate Editor

Last year Gulfcoast Legal Services Inc. ventured into unfamiliar territory. A change in how Congress distributes legal aid grant money stripped the St. Petersburg-based nonprofit of nearly half its annual revenue. The nonprofit no longer could afford the level of service it had provided over the past 26 years to indigent clients in Manatee, Pinellas and Sarasota counties.

To adapt, the St. Petersburg nonprofit reorganized and redefined its mission. It forged a new working relationship with Bay Area Legal Services Inc., the Tampa-based nonprofit that now receives the money Gulfcoast Legal Services lost. Some claim the reorganization actually created new efficiencies.

Then came another blow. Legal Services Corp., the Washington, D.C.-based congressional agency that manages the nation's legal aid grant program, claimed title to Gulfcoast Legal Services' headquarters.

The congressional agency wants a lawsuit to force the St. Petersburg nonprofit to transfer title to the property at 641 First St. S. or purchase it.

Although it acquiesced over the funding change, the St. Petersburg nonprofit is fighting for the property. Earlier this month, it asked the U.S. District Court, Tampa, to declare the existence or nonexistence of the St. Petersburg nonprofit's rights to the property under the deed it executed in 1980.

At first glance, one might wonder why anyone would want the nondescript property on First Street. Some staffers privately wish the nonprofit would relocate to better quarters. The property has required extensive repairs over the past year.

The St. Petersburg nonprofit acknowledges it purchased the property with federal grant money for $225,000. It consists of four small office buildings - 10,110 square feet of gross space constructed in 1946, 1950 and 1968 - on almost 14,000 square feet of land.

Look around, however, and the property's significance becomes clear. It adjoins the University of South Florida St. Petersburg campus. Across the street, small aircraft depart and land at Albert Whitted Municipal Airport. It's certain the property is worth far more than the original $225,000 purchase price.

If they have plans for the property, officials at the congressional agency are not revealing them. It is far too early in the process, they say, to think about marketing the property. Nor has anyone approached the agency about buying it, they say.

"We wouldn't comment on any pending commercial transactions," says agency spokesman Tom Polgar. "We just haven't thought about it, yet."

No one affiliated with the St. Petersburg nonprofit would talk about the property dispute. John Cunningham, the nonprofit's executive director, referred all questions to Holland & Knight partner Homer Duvall III, a longtime supporter who filed the federal complaint. Duvall also declined comment.

In the complaint, Duvall focuses on the deed filed in 1980. He argues it contains no mention of the congressional agency's interest in the property. He contends the agency only asserted its property rights after the nonprofit voluntarily withdrew from the federal grant program.

"LSC claims its reversionary interest arose out of an agreement to grant Gulfcoast a portion of the funds utilized to purchase property ...," Duvall states.

In response, the congressional agency claims the St. Petersburg nonprofit breached contracts that guarantee transfer of ownership if the group's affiliation ever changed. It has retained Tampa attorneys Steven Schember and Robin Henderson of Shumaker Loop & Kendrick LLP to defend against the federal action and assert a counterclaim.

Among the exhibits filed, the congressional agency included a letter dated Nov. 28, 1979, and signed by David Ross, the St. Petersburg nonprofit's former executive director. It refers to the agency's property interest.

"The program is presently in the process of preparing a memorandum of state law on the method by which Legal Service Corp. may retain control over subsequent transfer of the property," Ross wrote. "The program would not dispose of the property without prior Legal Service Corp. approval of both the disposal itself and the use of disposal proceeds.

"Any program mergers would result in the property being transferred to the successor program," he added.

Except for the property dispute, it appears the St. Petersburg nonprofit has fared OK with less funding.

"We've been able to make that transition very quickly without an interruption in the services we provide," says St. Petersburg solo practitioner Barry Salzman, the nonprofit's volunteer president.

Effective Jan. 1 2004, the nonprofit lost about $1.1 million in annual recurring revenue from the congressional agency. All of the money now goes to the Tampa nonprofit.

This change came about as conservative political forces pressured the congressional agency to develop a more regional approach to the distribution of federal dollars, Polgar says. In 1987, the agency distributed funds to about 279 legal aid groups. Today it supports only 104. In Florida, the number of federal recipients dropped to seven from 12.

Even with funding cuts, the St. Petersburg nonprofit ended the year with total revenue of about $1.96 million, state records show. Of the total, about $878,126 came from interest on trust accounts (IOTA), a state program administered by the Florida Bar Foundation. The difference comes from other local, state and federal sources and private fundraising efforts.

The joint interests of several legal aid programs in West-Central Florida accounts for why the nonprofit made as smooth as transition as it did, says Paul Doyle, the foundation's director of legal assistance grants. To ensure indigent clients did not get lost in the transition, the foundation worked closely with Gulfcoast, the Tampa nonprofit, St. Petersburg's Community Law Program Inc. and Sarasota's Legal Aid of Manasota Inc.

"There was a strong effort to do that," Doyle says. "It was focused on how best to preserve client services. So, organizationally, Gulfcoast was faced with having to grow smaller. There was no way to avoid organizationally (that) it was having an impact. The joint effort to ensure client services was either preserved or expanded or improved. That was not an easy task under these circumstances."

In light of the new demands, the Tampa nonprofit opened a St. Petersburg office and absorbed about seven lawyers from the Gulfcoast staff. The nonprofit apparently made the transition without any layoffs. It's Web site (www.gulfcoastlegal.org) lists 15 staff attorneys in its Bradenton, Clearwater, Sarasota and St. Petersburg offices.

With the new grant money, the Tampa nonprofit installed a phone bank that acts as a regional legal triage for indigent clients in Hillsborough, Manatee, Pasco, Pinellas and Sarasota counties. It handled about 52,000 inquiries last year, says Dick Woltmann, the Tampa nonprofit's executive director.

This new system capitalized on the strengths of all four of the legal aid groups that operate within the five-county region, Woltmann says. It has created service opportunities that didn't exist before.

Under federal rules, Woltmann says, legal aid groups that receive grant money cannot use the dollars to represent indigent clients who are illegal aliens, have claims against the government or want to pursue a class action against business.

Since it no longer receives federal dollars, Gulfcoast now offers legal services to indigent illegal aliens.

"What this allowed us to do, for the first time in our jurisdiction, is offer services to those who were prohibited from getting service under LSC restrictions," Woltmann says. "Gulfcoast is free from those restrictions."

Doyle adds: "Gulfcoast from our standpoint is a success story in this reorganization. They have stepped to the plate and are providing services that otherwise would not been available to poor people in the region."