PATERSON – The collapse of the plan to build a hotel and conference center next to St. Joseph’s hospital has resulted in the filing of a lawsuit on Thursday in which the would-be developer is seeking $400 million in damages from the medical center.

An artist’s rendering of a hotel proposed for Paterson.

The 51-page complaint by the nonprofit group that proposed building hotel alleges that St. Joseph’s Heathcare System broke their agreement for the project to be done on hospital-owned property in an effort “to extort” more money in lease payments.

The group, Medical Missions for Children, also alleges that St. Joseph’s has filed an eviction notice ordering the organization out of the space it has used at the hospital complex for the past 17 years by December 14.

As part of the fallout between two nonprofit entities that had worked closely together since 1999, Medical Missions says its Giggles Theatre program, which provided shows for sick children at the hospital, has been shuttered.

A statement issued on behalf of St. Joseph’s disputes the claims by Medical Missions and its president Frank Brady.

“It defies logic that Mr. Brady and Medical Missions for Children would choose to take this action against St. Joseph’s hospital and medical center,” reads the statement. “As Mr. Brady is well aware, the facts are clear and there is no basis for this lawsuit. This is nothing more than a frivolous lawsuit and only attempt to make headlines.”

Hospital representatives indicated that Giggles Theatre would continue to provide shows for the children, but they did not say whether St. Joseph’s would take on that operation or if it would be done by some other group.

St. Joseph’s announced its withdrawal from the hotel deal in June, just days before city officials were scheduled to approve a property tax break for the $129 million project, a step that Brady had said represented the last hurdle before construction would start. St. Joseph explained its decision by saying the construction of the 14-story complex in South Paterson would be too risky.

That announcement dealt a severe blow to Paterson’s revitalization hopes, especially because the state had allocated $105 million worth of tax credits to the project. Many local officials had seen the hotel as a key factor in Paterson’s efforts to rebuild its dwindling tax base.

Mayor Jose “Joey” Torres said on Thursday that the filing of the lawsuit underscored the importance of recent attempts to allow the tax credits to be used for some other project in the city. “Clearly, we don’t want to lose that money,” said Torres. “We’re working to come up with an equivalent project that can use those credits.”

Torres said the city’s efforts were being led by Paterson Business Administrator Nellie Pou, who in her capacity as a state Senator co-sponsored the original bill creating the tax credits for the hotel. Pou said she has been holding discussions with the New Jersey Economic Development Authority to come up with a way to salvage the funding for Paterson.

Pou said the original law specifically said the tax credits had to be used for a project on a hospital. She said the wording would have to be changed through an amendment to the law, or a new bill would have to be drafted.

Some city officials have said that mayor is backing the construction of a parking garage, housing complex and commercial space on lower Market Street in the Great Falls historic district, a proposal that they said might serve as an alternative use for the tax credits. Advocates say the garage would provide much-needed parking for the Great Falls national park.

City Council President William McKoy said “it would fantastic” if the city could avoid losing the $105 million in state tax credits. “I think it’s too far gone,” he said of the possibility of reviving the hotel at the hospital.

In its lawsuit, Medical Missions says it already has spent about $10 million in legal fees, engineering contracts and other preliminary work on the hotel proposal. Moreover, as part of its damages claim, Medical Missions maintains that it is losing the $266 million in revenue that consultants projected the hotel would generate over its first 33 years.

Brady has maintained he was blindsided by the hospital’s decision to drop the hotel plan. St. Joseph’s has said that the lease for the project never received the formal approval of the hospital’s board of trustees, even though the document had been signed by the man who was the hospital’s chief executive officer at the time, William McDonald.

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