The Town of Half Moon Bay Hires Lawyers to Prevent Bankruptcy

The San Francisco Chronicle reports:

The Half Moon Bay City Council on Tuesday night voted to hire a team of appellate lawyers and announced it would fight a potentially ruinous federal court decision that orders the city to pay $36.8 million to a developer in a property dispute.

"The City Council has decided to go forward with an appeal," Mayor Bonnie McClung told a crowd of more than 70 people gathered for the council's first regular meeting since the ruling came down. "We are united in our position at this point that this is the best course of action for us."

The council voted unanimously to hire Orrick, Herrington & Sutcliffe, a San Francisco law firm that specializes in public finance and corporate law. In the same action, the panel also hired Piper Jaffray, a financial firm that has worked with cities across the state, to serve as a financial adviser.

The firms will work with the council on what to do about a court judgment that is more than three times the coastal city's $10 million annual budget. The judgment, the council said in a joint statement, threatens the "very existence of our city government."

Tuesday's decision was applauded by some residents as a bold move to preserve open space and confront "predatory" developers. Many others who addressed the council urged settlement talks with the developer.

"This whole thing tonight is surreal; it's like talking to my 3-year-old about Santa," said resident Donald Sheardown.

More legal battles will get the city deeper in debt and only benefit outside law firms, Sheardown said.

"My kid keeps asking me, 'Why does Santa go down the chimney? Why doesn't he use the door?' " Sheardown said. "Why don't you negotiate with the man? Why don't you go through the door?"

Palo Alto developer Charles "Chop" Keenan, who owns the disputed property in trust, said earlier that he is willing to negotiate with the city. But he indicated that a legal appeal would chill his desire to talk.

"I never dreamed I'd be in this situation. It's not where we wanted to be," Keenan said recently. "I wanted to just build what I bought, which was a vested tentative map for 83 lots."

John Knox, an attorney from Orrick, told those at the council meeting that U.S. District Judge Vaughn Walker's Nov. 28 ruling was flawed.

"We believe the judge's decision is erroneous and contains many grounds for reversal," Knox said.

The city would first file challenging motions before the ruling is finalized and then appeal to the Ninth Circuit Court of Appeal in San Francisco if unsuccessful, Knox said.

He declined to discuss specifics on how the city will contest the ruling.

The city's dilemma arose from a dispute over a 24-acre parcel just east of Highway 1 that is bracketed by homes.

The property, known as Beachwood, is owned in trust by Keenan, whose trustee bought it in 1993 for $1 million in a foreclosure sale and planned to build an 83-unit residential subdivision.

The city had given tentative approval to a previous owner for the development in 1990. A slow-growth bloc won a majority on the City Council in 1996, however, and the council later opposed the development, saying protected wetlands had appeared on the property. Keenan's trustee sued in 2000.

Residential development on protected wetlands is prohibited in California's coastal zone, which includes all of Half Moon Bay.

Walker ruled that the city was largely responsible for creating the wetlands - and damaging the property - by botching a storm drain project and by allowing dirt to be removed for a nearby housing development.

The city had argued the wetlands were natural.

Property rights are property rights.We hope to see a Chapter 9 bankruptcy.