YOUNGSTOWN — The owners of a student-housing complex are suing Youngstown for $440,000 they contend is owed from a promised water infrastructure grant.

Youngstown Campus Associates LLC of Pepper Pike, which developed the $16 million The Enclave project near Youngstown State University, entered into an agreement with the city Sept. 14, 2017, for a one-year $4 million loan; a 100 percent, 15-year tax abatement; and a $500,000 grant from the water fund to help defray the cost of water infrastructure expenses.

Youngstown Campus received $60,000 from the city in water funds Feb. 26, 2018, and then turned over rights to The Enclave to two companies: Butterfli Holdings 001 LLC and Butterfli Holdings LLC 002 LLC, with the exact same Pepper Pike address as Youngstown Campus.

The Enclave consists of 64 units with 194 beds for YSU students at 310 Wick Ave.

The companies are seeking the remaining $440,000, but the city refuses to give the money.

The lawsuit filed Thursday in Mahoning County Common Pleas Court contends breach of contract and that the city violated “a clear and unambiguous promise.”

The case is assigned to Judge Maureen Sweeney.

City Law Director Jeff Limbian said previous administrations should never have made such promises as they violate state law.

“The city cannot simply accede to a payment that was demanded by an entity in contravention of the law,” he said. “The law does not allow us to use those funds for that purpose, and the state auditor doesn’t allow us to do so. If a court tells us it’s an obligation, we’ll certainly take appropriate action.”

Limbian added: “If the city is obligated to pay something that should have never been considered, it’s not going to happen. Prior administrations should not have tapped into that restricted fund for this type of project.”

Discussions with the housing complex’s owners have been occurring for several years, Limbian said.

The state auditor, in reports of the city’s finances in 2017 and 2018, determined Youngstown improperly used about $5.7 million from its water, wastewater and environmental sanitary funds for general fund purposes, primarily for economic development projects.

After receiving a significant amount of federal COVID-19 funds, the city repaid the money owed to the water, wastewater and environmental sanitation funds from its general fund in 2021.

The city also stopped the practice of using money from those restricted funds for economic development purposes.