HMB’s attorneys explain why paying Keenan is the only option they recommend

By on Tue, May 19, 2009

Half Moon Bay’s attorneys explained why the city must now pay developer Chop Keenan the $18 million they agreed to pay him in their April 2008 settlement in a sobering presentation to the city council at Tuesday night’s city council meeting.

There were few comments or questions from the sparse audience, and no one from the public tried to argue with the high-priced attorneys on the dais.

The mood from the city council was one of acceptance—the final stage of grief. Mayor John Muller said that he’d still work to get assistance from the state, and that it was time for "some individuals who sit on the sidelines and don’t get involved" to support the city in its efforts. Naomi Patridge and Muller expressed their determination not to declare bankruptcy, but the city’s attorneys had already said that wasn’t really an option in any event.

The attorneys laid out the city’s options, or lack of them, one at a time. City attorney Tony Condotti spoke first.

Condotti said that the city can’t reinterpret its definition of wetlands because the interpretation came from state appellate court. In its decision, the court said it wasn’t bound by the city’s interpretation, and that interpreting the law is a "judicial function".

However, he believes the city may be able to change the buffer zones around the wetlands on Beachwood, which are part of the city’s zoning code. The code says that there is should be 100 ft buffer around ponds, lakes, and marshes. The city attorney suggested that the wetlands at Beachwood may not be among those that need a 100 ft buffer.

The city attorney also said that disincorporation would not remove the city’s $18 million liability to Keenan. Disincorporation would have to go before the Local Area Formation Commission, and LAFCO would be obligated deal with the city’s assets and liabilities—including its debt to Keenan.

John Knox of Orrick, Herrington & Sutcliffe said that when the successor bills to AB1991 (SB863 and AB/SB 650) began to falter that they began to consider their options, and they have been preparing to issue bonds to pay the settlement.

The city has a very strong credit rating for a city of its size. S&P has just rated it AA-. If it issued bonds right now, it should be able to get an interest rate of 5 to 5 1/2% on 30 year general obligation bonds of $18 million. The city is not likely to ask for the full amount. It still has $5 million from ABAG and may be able to raise money from other sources.

Under those terms, the city would have to pay $1.2 million/year for 30 years to finance $18 million, and $800,000 a year to pay off $13 million.

Mark Levinson, a bankruptcy attorney with Orrick, said that the city will not be able to get out of its obligation to Keenan by declaring bankruptcy, because "you have the ability to solve the problem [by issuing bonds] and you’re choosing not to do it".

Levinson’s advice was to pay the judgement and not spend more money on lawyers, saying "John (Knox) and I are really expensive". He noted that if the city does not pay Keenan by August 29, it will owe 6% interest on $18 million going back to December 2007—another $2 million.

After today’s thumping in the polls, the people have spoken about frivolous expenditures from the state legislatures and the executive branch.  Paying off HMB’s $18 million or is that $20 million has to be done NOW.  If you don’t, it will become $42 million and you can’t say Chop Keenan didn’t give you a break.

ABAG is not the answer to settle a HMB’s lawsuit or any lawsuit either.  ABAG was not designed to expend their proceeds to settle lawsuits of this nature.  ABAG money (taxpayers money) should be used to enhance our bay area development using those association fees from our member cities and counties governments, not for special interest mistakes created by a poorly function city council and their planning commission decisions. 

This end run to ABAG is madness and smells just as bad as AB 1991, AB/SB 650, I- Bank, and Proposition 84 raids on unintended funds passed by the voters - no wonder why the voters, voted the way they did today.  Business as usual is out and HMB is out of gas!

It is time to find a bonding attorney and underwriters to let the bonds and stop making things worst!

It is time to go into bankruptcy, and you still have to settle the debt using bonds.  Bankruptcy is going to cost the taxpayers even more money to work you through your problems, so why punish the county who has to provide you with services and continued oversight since you still have to pay Mr. Keenan?

As your counsel said, “we are very expensive” and it is about to get more expensive is good advise!

Bad advice -seeking ABAG funding to settle a lawsuit using funds to settle a “personal, on going” civic failing!

Just maybe bankruptcy and disincorporation will give future city councils and commissions a new start and think through the consequenses in avoiding civic failings!

HMB already has received a $5 million insurance settlement from ABAG:


That’s the money they plan to apply to the Beachwood settlement.

*El Día de los Muertos *

Was ABAG’s $5 million insurance settlement earmarked to settle Chop Keenan lawsuit or was that insurance money used to offset HMB’s attorney fees and/or to replenish HMB coffers in other accounts?

If it didn’t go to Keenan in an escrow account then HMB receive the proceeds for an unintended purpose, legal fees or replenishment other accounts that they borrowed from or something else untoward.  It looks like cooking the ethical books and barbecuing the peoples senses who paid for that insurance policy is business as usual!

If that $5 million insurance money is set aside to reduced Chop Keenan’s settlement, then you only need to float a bond or raid an appropriate Sacramento account for $13 million; yet the continued reports is to obtain the full amount - $18 million. 

It seems to me that HMB is misleading the public and the legislature and executive branch and asking for more money than they need if they “parked” $5 million from insurance.  I bet it has already been spent!  Using the current parlance: ” A lot of wiggle room is created with loose language in legislation, semantic manipulations, backroom horse trading, and convenient butt-covering “forgetfulness.” 

I guess this forgetfulness or is it obscuration and obfuscation of monies receive was never intended for Chop Keenan, but parked in another harbor.  The better story might be to have a scavenger hunt for the $5 million.  I’d check Princeton-by-the-Sea and perhaps that $5 million is located in one of its “halibut” icing facilities.  Of course, Halloween is upon HMB and we know the next day is El Día de los Muertos or All Saints Day - The Day of the Dead….

Get cracking on that bond or bankruptacy; you’ll still be blessed by that Saint of Lost Causes

HMB Receives $5 Million Insurance Settlements

I reread carefully and was intrigue the June 14, 2008, article cited and find it misleading!

“The city of Half Moon Bay has received $5 million from the Association of Bay Area Governments insurance pool.  Although the city says at least six times in the three-paragraph release that the money will go toward its litigation expenses, this is $5 million that the city did not have before….  Since the city has already budgeted and spent the money for past litigation, this $5 million could be applied to the $18 million settlement with developer Charles “Chop” Keenan, significantly reducing the amount they would have to borrow.” 

Dissecting it it says: “Since the city has already budgeted and spent the money for past litigation,” how can “this $5 million… be applied to the $18 million settlement with developer Charles “Chop” Keenan, significantly reducing the amount they would have to borrow.”?  Which is it? 

This subterfuge is another example of HMB’s reporting that demonstrates “A lot of wiggle room [to create] with loose language in legislation, semantic manipulations, backroom horse trading, and convenient butt-covering “forgetfulness” in last nights council meeting.

It looks to me like HMB owe the whole $18 million ($5 million was not applied to that debt, but spent on attorneys).  What is the balance of HMB’s attorney and litigation fees?

The $5 million is unrestricted funds that were paid to Half Moon Bay which they are free to spend.  I would wonder if they still have that total amount around given the decrease in revenues which resulted in the layoff of the city employees.  It doesn’t rally matter since they need to come up with the $18 million and that appears to be coming thought a bond issue.  They still own for the “park” on 92, so I doubt that here is any spare cash laying around.

One thing you have to remember about lawyers: they will say pretty much whatever their client wants them to say as long as the subject involves some grey area, as most subjects do.

Lawyers are paid advocates for whatever position their client wishes to put forth at the time. Hence, lawyers are not bound by rules of consistency in their arguments.

Last night’s meeting (which I attended) was a paid spin-job by HMB’s lawyers to defend the decisions of the Old Guard City Council.

First, we heard from Lawyer Anthony Condotti who defended the Old Guard Council’s dumb decision not to appeal Judge Walker’s unfair judgement against the City. Condotti claimed that as soon as he read Walker’s decision in December 2007, he knew that an appeal would be a “tough road to hoe.”

That’s funny, because back in January 2008, HMB’s newly hired hot-shot lawyer John Knox (who was sitting next to Condotti last night) told citizens at a public meeting that HMB’s chances of winning on appeal were “very good.” Maybe Knox hadn’t bothered to read Walker’s judgment before he made that statement. Or maybe both Knox and Condotti are just saying whatever their employer wants them to say at the time.

Another thing put out by the lawyers last night was that bankruptcy is not a legally feasible option for HMB because the City will not be rendered “insolvent” by paying off Keenan, i.e., the City has the financial ability to pay off Keenan without sacrificing essential public services.

In fact, the lawyers went so far as to say that HMB could maybe get by with having to pay only about $800,000 in annual debt service on bonds issued to pay Keenan. In fact, the lawyers stated that the City has been awarded an AA- credit rating to issue these judgement bonds.

Wait, weren’t we told last spring that the sky would fall if the City had to actually pay off Keenan the $18 million settlement?

Didn’t the Old Guard City Council and Police Union rep A.J. Johnson parade before the state legislature in Sacramento last spring and claim that the City would cease to function properly unless Keenan’s blank check development bill (AB 1991) was passed?

It turns out that the drama over AB 1991 was all a charade. The latest “truth” that we heard last night is that HMB can easily pay off the $18 million settlement to Keenan by issuing bonds, Maybe somebody should relay that information to Jerry Hill and Leland Yee. It turns out that HMB doesn’t need any help from the state to pay off Keenan.

In order to pay off Keenan, all the City really needs to do perhaps is cut back on excessive annual police salaries and benefits, including those of Police Chief Don O’Keefe who recently received a big raise while other City employees were laid off.

Whow Kevin.  You think things are messed up now?  Give it a couple months.  You aint seen nothing yet