Federal authorities sued New Berlin on Thursday, claiming racial discrimination drove the city's decisions to block a low-income housing development, in violation of the Fair Housing Act.

A 13-page complaint spells out the lengths to which city leaders and staff purportedly went to stymie MSP Real Estate Inc.'s plans, even so far as revising the city's 2020 comprehensive plan.

"The defendant's actions as described herein were taken because of race and because of community opposition that city officials understood to be based on the race and on racial stereotypes of the prospective tenants of affordable housing," the complaint states.

The complaint details threats against the mayor and his children and racially derogatory terms used during the controversy.

The developer, MSP, filed its own federal suit in March claiming Fair Housing and Americans with Disabilities acts violations by the city. It seeks nearly $13 million in compensatory damages plus punitive damages. In response to that action, the city has denied race was a factor in rejecting the project.

Mayor Jack Chiovatero withstood a recall effort over his initial support for the project. He later changed his position.

Chiovatero declined to comment Thursday, saying he and city staff needed time to review the lawsuit.

MSP President Milo Pinkerton, in a prepared statement, embraced the federal government's action.

"We feel gratified that the Department of Justice, after conducting a full and fair review of the city of New Berlin's actions with regard to MSP's housing proposal, agrees with us that the federal Fair Housing Act was violated by the city," Pinkerton said.

The 180-unit project was announced in early 2010, as part of City Center, an area on both sides of W. National Ave. east of S. Moorland Road. MSP first had planned to build three buildings with 80 affordable residences, termed workforce apartments, and another building that would house 100 senior apartments, at 14901 W. Library Lane.

All the units were for people making 60% or less of area median income.

It won approval in May 2010, but the city's Plan Commission rescinded that in July after dozens of residents rallied against the affordable housing component.

In early January, MSP announced it was taking over the Deer Creek Homes condominium project on the same site, which stalled in 2006 after only one of four buildings was completed. MSP intended to complete the remaining 102 condo units along Library Lane.

Opponents believe the condos will be low-income apartments because MSP has reserved affordable housing federal tax credits for all 102 units it is proposing as part of what it is now calling the City Center Condominiums.

Racial objections

From the start, some objectors expressed concern that prospective tenants would be African-Americans or other minorities and used racially derogatory terms to refer to them, or implied racial bias as the reason for objecting to the development, according to the complaint.

The complaint cites correspondence that mentioned "white flight," crime, drugs, slums, gangs, families with 10 or 15 kids, needing "to get a gun," not wanting New Berlin to turn into Milwaukee, moving to New Berlin "to get away from the poor people," not wanting to provide housing to people "who work but do not live here." Some writers also used racially derogatory terms for African-Americans.

New Berlin, a city of about 39,000, is 95% white, according to the lawsuit.

Chiovatero and his family suffered extensive harassment. A sign that read "n----- lover" was placed in his yard, "Bigot" was spray-painted on his driveway and "Leave or _ _ _" was written on his fence, according to the complaint. The mayor got threatening phone calls, project opponents approached his children, and someone slashed his car's tires and shot out the windows, the complaint states.

The pressures prompted Chiovatero to email a friend.

"Our city is filled with prejudiced and bigoted people who with very few facts are making this project into something evil and degrading," he wrote. "Unfortunately, I will be doing everything in my power to end this project, it will result in lawsuits and making New Berlin a community of bigots."

The mayor later apologized for the email.

MSP subsequently tried to build condominiums targeted for low-income residents, but city leaders blocked that, too.

The federal lawsuit asks the court to force the city's approval for MSP's project and adoption of steps to prevent future discrimination. It also seeks monetary damages.

"It is imperative that unlawful discrimination not be a barrier to the construction of housing that is affordable for seniors and working families with modest incomes," said Thomas E. Perez, assistant attorney general for civil rights.

U.S. Attorney James Santelle in Milwaukee said, "This filing shows a history of discriminatory conduct and the department not only seeks a reversal of the discriminatory denial of permission to build that housing but other forms of remedial relief under the Fair Housing Act - including the municipality's commitment to prevent a recurrence of this behavior."

In March, the Metropolitan Milwaukee Fair Housing Council filed a federal discrimination complaint against Waukesha County, contending it has been engaged in illegal housing discrimination in violation of rules for receiving some federal money.

Mike Johnson of the Journal Sentinel staff contributed to this report.