Half Moon Bay seeks reversal of $36.8 million judgment

Claiming that the developer had more responsibility for being aware that his 24-acre property was a development problem, Half Moon Bay is preparing to appeal a November decision against it that could save the city from a judgment of almost four times its entire operating budget.

Developer Charles Keenan was awarded a $36.8 million judgment against the city for creating wetlands on his “Beachwood” property, preventing him from turning the 24 acres — purchased for $1 million in a foreclosure sale — into an 83-unit housing complex.

On Friday, Mayor Bonnie McClung said the city’s retained legal counsel urged them to appeal the Nov. 28 Federal District Court of California ruling that sided with Keenan, a move that, if successful, could reverse the decision to the city’s favor.

Lawyers representing the city are expected to argue that Keenan should have known that his property was too much of a wetland area for development, and that would remove the city from sole responsibility, McClung said.

The appeal will likely be filed within the first two months of the new year.

“The attorneys tell us that we have a good opportunity at reversal and, at this point, it’s certainly the first step we need to take, to appeal what we think was an erroneous decision,” McClung said. “An appeal and a reversal would be lovely, and I think a settlement would be excellent as well.”

If the city loses the appeal, and is unable to reach a settlement, the $36.8 million judgment plus an estimated $3 million or more in fees could hit it so hard it would be forced to dissolve into an unincorporated piece of San Mateo County, governed by the county.

The dissolution of a city is not unprecedented in this area, says coastal Supervisor Rich Gordon, as the city of Alviso melted itself into San Jose in the 1960s.

The City Council would have to vote to dissolve, then the county Local Agency Formation Commission would have to approve the move and finally Half Moon Bay residents could vote to block the change.

If dissolved, Gordon said the county would take on the $10 million operating budget and the city’s revenues, and then city properties or other assets would have to be used to settle the debt.

A more likely scenario would be a series of bonds and service cuts, to space the payment out over a number of years and avoid irreparable local damage, Gordon said.

Calls to Keenan’s attorney were not returned by press time.

jgoldman@examiner.com

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