Colwest files breach of contract claim against county over old hospital project

Correction: Melanie Westbrook said her company, Colwest, received 50 percent of the funding once the project was deemed 65 percent complete, but Colwest has not received any additional funding since then.

It’s been more than two years since Lassen County announced it was accepting proposals for Homekey projects, funding by state grants.

It’s been more than two years since the Lassen County Board of Supervisors unanimously directed staff to move forward with two supportive housing projects — one at the old hospital and another than was abandoned at a motel across the street from Lassen High School.

The project at the old hospital completely turned around in February 2024 when the Susanville School District complained to the supervisors and sought the public’s help in shutting the project down.

Colwest has continued to work on the project since then, and has received 50 percent of the funding at 65 percent completion but no more.

In response, on July 11, Colwest filed a claim for damages with the county alleging breach of contract.

According to the claim, obtained by LassenNews, “The county of Lassen is unlawfully withholding grant funds due and owing to Colwest Investments, LLC under the Homekey Round 3 project known as the Diamond Mountain Living Center. Colwest and the county are co-grantees under the state of California’s Homekey Grant Agreement (Project No. 23-HK-18087) executed and approved by the California Department of Housing and Community Development. In addition, Colwest and the county are parties to a separate Standard Agreement that does not grant the county any authority to withhold grant disbursements.

“The county, without legal or contractual authority, is withholding finds based on unsubstantiated allegations of, inter alia, noncompliance with prevailing wage laws. However, the state agreement makes clear disbursement of funds is conditioned upon a certification of compliance with prevailing wage laws — a certification that would have been required before any funds were released by HCD. Accordingly, the county’s withholding of funds is in direct breach of both the state grant agreement and the standard agreement with Colwest.

In its claim, Colwest alleged it has “suffered significant monetary damages due to the improper and ongoing withholding of grant funds. These include but are not limited to:

• loss of operating capital for project implementation;
• Disruption of services and obligations under the Homekey project.
• Reputational harm and administrative delays.
• Accrued costs, interest and fees associated with delayed funding.
• The amount claimed exceeds $10,000.

Background and old stories
Click here to see LassenNews’ June 1, 2023 story, “Request for proposals for HomeKey Projects.”

Click here to see LassenNews’ July 14, 2023 story, “Supes direct staff to move forward with two supportive housing projects.”

Click here to see LassenNews’ Feb. 2, 2024 story, “Public fight brews over hospital housing project — SSD asks for public’s help to stop project near Diamond View School.”

Click here to see LassenNews’ Feb. 10, 2024 story, “Supes meet Tuesday morning.”

Click here to see LassenNews’ Feb. 27, 2024 story, “Egan said low-income housing project at old hospital has been approved — questions the value of re-vetting the project.”

Click here to see LassenNews’ Feb. 29, 2024 story, “Homekey funds another 370 homes, helping Californians at risk for homelessness in Oakland and across the state.

Click here to see LassenNews’ March 21, 2024 story, “Egan updates Supes on Homekey Project near Diamond View School.

Click here to see LassenNews’ May 20, 2024 story, “Supes meet Tuesday morning.”

Click here to read LassenNews’ Aug. 19, 2024 story, “Supes hold special meeting tomorrow — ‘significant exposure to litigation’ regarding housing project at old hospital.”

Click here to see LassenNews’ Aug. 23, 2024 story, “Supes meet Tuesday, may approve amended Colwest contract.”

Click here to see LassenNews’ Sept. 1, 2024 story, “Supes consider amended agreement on controversial housing project at old hospital as an ‘acceptable risk’ at Tuesday’s special meeting.”

Click here to see LassenNews’ Sept. 7, 2024 story, “Supes continue discussion of controversial Colwest housing project at Tuesday’s meeting.”

Click here to see LassenNews’ Sept. 13, 2024 story, Newsom signs bipartisan housing package and launches Prop 1 Homekey+initiative.”

Click here to see LassenNews’ Sept. 18, 2024 story, “Board of Supervisors’ Roundup — Tuiesday, Sept. 17.”

Click here to see LassenNews’ Jan. 13, 2025 story, “Supes revisit controversial Homekey project at old hospital at tomorrow morning’s meeting.”