In a press release, the city said it was looking out for residents with its effort to "significantly" increase the value of the Scott School.
"What is a city to do with a business that demands the taxpayers of South Salt Lake to let them operate free of charge," the city's statement said. "This would be a violation of public trust and state statute."
Salt Lake County purchased the Scott School campus, 3300 S. 500 East, from Granite High School when it closed in 2008, paying $764,000 in Zoo, Arts and Parks (ZAP) funds. South Salt Lake became the landlord through an interlocal agreement with the county. It entered a 10-year, renewable lease with Pioneer Craft House, which called for the nonprofit to pay rent of $1 a year to use the five buildings on the campus.
Lee alleges in the lawsuit that the city, strapped for money by the recession,wrongfullyterminated the remainder of that lease in April 2012 based on false claims that Pioneer Craft House had failed to account for and pay the city room and facility rental fees as required, and because the lease did not provide adequate compensation for city-owned property. The lawsuit maintains the original lease did not require Pioneer Craft House to make such accountings and that it paid the city sums it received from rental of facilities. Lee also said a law in place since 2010 allows cities to enter low rent deals with nonprofits.
According to the city's statement, the South Salt Lake City Council decided to terminate the 2008 lease after trying for two years to get Pioneer Craft House to account fully for its use of the Scott School. The council estimated the city was contributing about $40,000 toward the operation without much benefit to residents.
In July 2012, the city and Pioneer Craft House entered a one-year rental contract that required the nonprofit to pay annual rent of $15,000 per year which it managed to do by selling its "substantial" collection of pioneer-era art work, the lawsuit states. The city also required the nonprofit to vacate the Scott School building and decreased its access to space in other buildings on the property.
The nonprofit proposed a new lease agreement to the city in May, offering to pay a more "reasonable" monthly rent of $408.57 per month, a fee equivalent to 20 percent of its gross profit. The city countered with an offer to extend the existing rental contract, which it said the nonprofit rejected.
Pioneer Craft House then filed a notice of claim with the city alleging its 2008 lease had been wrongfully terminated. The city responded with an eviction notice, Lee said, giving Pioneer Craft House until July 26 to vacate the premises.
"Craft House has been diligently seeking alternative space for its programs and valuable equipment," Lee said in a news release. "It has more students in more classes than any time in the past 15 years."
It has about 70 students half of whom are veterans enrolled in such classes as jewelry making, lace making, Native American arts, pottery, painting and weaving.
Pioneer Craft House wants a federal judge to declare its 2008 lease agreement valid and order the city to repay rent it received less $1 from the nonprofit. It also wants a judge to order the city attorney to individually pay it $50,000 in punitive damages and other defendants to pay "reputational" damages in an amount yet to be determined.