HMB bailout plan is still pretty murky

Posted by on Wed, May 6, 2009

Assembly member Jerry Hill’s bill to get Half Moon Bay $10 million for its Beachwood settlement, AB650, is still riddled with uncertainties even as it nears a do-or-die shot at two-thirds votes in both houses of the state legislature. On Friday, Hill restructured AB650 from a grant to a loan by the California Infrastructure and Economic Development Bank.

Julia Scott at the County Times had an conversation with Assemblyman Hill that was similar to the one we had last Friday, in which he hedged on the ultimate structure of funding in the bill. Scott also discovered that the guy that runs the I-Bank had never heard of AB650 as of Monday.

Hill said the California Infrastructure Bank Fund was one possible source of funding and the language of the bill could change again to reflect other possibilities later on.

"There may be several funding sources, there may be other grants and loans," said Hill. "The purpose is to try to get something that will work and that will keep the bill moving." ...

"What you describe is completely unique to me. There are a lot of requirements that must be met by each municipality to qualify to borrow and what they can borrow for," said [I-Bank Executive Director Stanton] Hazelroth. ...

Hill maintains that Beachwood will still be turned into a park under the loan scenario, although the new bill language does not contain the word "park."

Stanton Hazelroth, Executive Director,

May 5, 2009

Dear Sir,

Assemblyman Hill with the likely support of Senator Yee are up to their “How to beat the system” to pay off Half Moon Bay’s $18 million lawsuit to Chop Keenan!  Hill and Yee originally introduced AB 650 and SB 650 to settle a $40 million lawsuit that was negotiated to $18 millon to bailout HMB and tried to get Proposition 84 funds, but were thwarted.

Hill announced that $10 million might be provided by the “California Infrastructure and Economic Development Bank to help settle the lawsuit.” This bank was “created in 1994 ‘to promote economic revitalization, enable future development, and encourage a healthy climate for jobs in California’ that generally makes loans to local governments to finance the construction of infrastructure.”

Does this mean that the city is going to pay for infrastructure or pay off a legal judgement? Based on the law and mission of the I-Bank, legislative members are stretching the truth; where is the “truth in lending law” for convoluting this loan into something it was not meant to be? As I understand infrastructure, it is the basic technical support for developing industry or housing such as roads, water, sewage facilities, power grids, and telecommunications….  This loan is not for developing a park, it is to settle a lawsuit!

I see creative financing being shaped by the city council that created their own problem by their failure in the 1990s from honoring their original planning commitment to Mr. Keenan. Will $10 million be moved from one or more HMB accounts to pay off an $18 million judgement and will that lost money be replaced with a $10 million loan to other HMB accounts? That doesn’t sound like a loan to Chop Keenan to build an infrastructure. Yet, HMB will have a loan with interest and doubtful spending on any immediate infrastructure to the Beachwood property. Is this like having paid an $18 million debt and holding another $10 million in deposits not used and paying a substantial interest for 30 years on a unused loan or something more disingenuous.

HMB, the city council and their district politicians thinks the taxpayers are suckers. It is time to keep loans as loans, settlements as settlements, and stop stripping the I-Bank banking system of monies that the electorate authorized by propositions and legislating to create specialized banks that was not meant to settle a lawsuit! 

An excellent background and summary of why HMB chose Federal Court and what happened:

It is time to let HMB go the route of bankruptcy or float a bond using a legitimate bonding source to settle their lawsuit instead of circumventing the purposes of governing and financing!

I asked the San Mateo County Times and Julia Scott reinvestigate her original story: to answer the following: If HMB were to receive the funds, how long will it take to build the “Beachwood” Park if they are going to use the money to pay off Chop Keenan and where will that money come from?  Every penny of that loan better go to building the park and no cutting corners or using it to pay off a settlement.  All this political machination is unethical, possible criminal conduct and continuing a fraud to advance a political crime…!

Ms. Scott would you follow up on this story and let the public know how long it will take for HMB to complete the park and report that the loan is not really for the park, but for Chop Keenan.  That is not in keeping with the I-Bank or any proposition monies!  Would you interview Hill and the Mayor/City Council of HMB as to the estimated completion date after the loan is received as well as a commitment from HMB that the money is “PARK’ed” onto the rightful location?

Thank you and your staff for your consideration - Heads up!

I certainly support fiscal responsibility at the state level, as well as making local governments responsible for their misdeeds. I also believe the city’s settlement was a particularly bad piece of work and feel that they should take responsibility for it. Finally, I don’t live in HMB, so I have no financial interest in this matter, except as a tax payer.

However, having read the Beachwood opinion, it does not demonstrate the bad faith on the part of the city that would warrant the 30 years of punishment implied by that judgement.

The city got a bad break in federal court after having prevailed in the state supreme court.  The decision was completely out of line with the city’s behavior and with any reasonable outcome Keenan could have expected.

I’d like to see the city get some help from the state with the settlement, but I would also like to see the city take some responsibility for their bad deal and some reasonable condition set by the state. 

I can’t say I support AB650 right now, because we have no idea what the final bill will look like.

I don’t blame you for defending HMB and it citizens.  However, this has entered well into a 2nd decade of unresolved wrangling.  All expenses that the city incurred probably comes close, if not exceeds $18 million to date.  It was a bad decision to go into federal court (or any court) where HMB thought that they would get a better deal.

The city got a break when the judgement was reduced to $18 million - in retrospect, a good deal for HMB.  Although land is less today, it should be assessed at the highest fair market price it was worth before the settlement if the owner wanted to sell the property or settle with HMB.  The city breached the permit agreement and continued to inhibit the owners’ rights based upon the city’s original agreement before HMB created an artificial wetlands.

The machinations of HMB’s politicians is reproachable now that the city and our representatives are searching for an out that should have been settled out of court.  Governments are punished all the time when their staff misuse their authority… - just look at all the successful lawsuits against police or mass transit districts… for negligence…!  HMB was negligent.

To punish the state taxpayers by misappropriation of proposition monies or I-Bank funds to settle this lawsuit is a political crime.  If a city incorporates, it has a responsibility to its taxpayers and the city lost sight of that over a great many elections and commission appointments.  HMB attorneys gave you their best advice, but you have to honor your commitment to the builder and you should have settled out of court.  This is not a matter of hindsight; it is typical in risky litigation where systematic reneging occurred by the council/planning commission/engineering players.  Self insurance from a funding reserve or bonding or floating tax is about the only legitimate avenue to settle any lawsuit.

It is too late for “could have, should have would have” and “this is no longer about who shot John.”  The city doesn’t lose its incorporation status through bankruptcy, but it should emerge out of bankruptcy even if that takes 30 years - the life of many bonds.  Maybe disincorporation is a better resolution - you don’t lose your small town status, there is a large oversight pool of politicians that can take the heat and the money loss or gain is spread over a larger segment of the population.

Jerry Hill needs to stop shopping around and the best thing he can do for the his district is become a spear point for closing the loopholes and earmarks that he and other politicians and government entities exploit to get around the system that was not the intent of the law or the voter legislation.  Half Moon Bay Mayor John Muller. stated that his “...understanding is that the leadership in Sacramento “... can look for different avenues to get funding from what the original intent was….” 

That is the wrong message to new politicians as are the vagaries of an “old guard” and civil servant that has brought about a breach in the public trust.  The public knows there are many ethical breaches and self-serving earmarks that are not meretricious.  Hill and Yee should join forces and maintain a higher standard of accountability and make it a sustained public debate that demands that “business as usual” is not in our national interest.

I don’t see this as punishing the taxpayers. I see sharing the pain as part of the function of government in certain circumstances. An arbitrary federal judgement that exceeds the limits of its insurance is not unlike a natural disaster. What happened was mostly beyond the city’s control.

Certain members of the community, some of them residents of HMB, have been wallowing in schadenfreude over this. They seem to hope that this will cause the city to stop defending itself against bullying lawsuits from developers. That could be an unintended consequence of letting the city twist in the wind and one that would not be good for the Coastside.

And, just to be clear, the city did not take this to court, Keenan did.

Murky?  Not anymore!  AB 650/SB 650 failed to get out of the Senate Committee today and Hill and Yee were told the I-Bank isn’t the appropriate forum to borrow money.  I am glad to see their end run raid on the bank ended.

Tomorrow is mid-May and I wonder if the Governor will releases an update to his original budget based upon changes in the state’s revenues, and expenditures or wait intil Tuesday’s election results.

Both the Governor and the Legislature better get cracking and get the budget settled before July 1, 2009 and signed.

With Hill and Yee’s obsession with the HMB bailout, they should suspend jockeying and shopping around with and start monkeying around with the budget. Remember, no earmarks for the HMB bailout!

It is now time for the HMB City Council to get their bond financing package in order - hire bonding counsel and get the underwrters on board or decide bankruptcy is the appropriate resolution!

In any event, even if the council would have received the bailout money, it would be a half decade to get the park built, if even then.  Face facts, the city council lost the citizen’s collective mufti in this charade and now must parade down to the Pacific to take a bath with a few mea culpas.  There skinny dipping should get their of the importance of paying attention to details and consequences!