The city now has until the end of 2011 to smooth out all impediments to construction on Beachwood and 12 adjacent acres or pay Keenan $18 million plus interest to settle the deal.
The City Council voted 4-1 to accept the terms. Councilman Jim Grady opposed the deal. Keenan executed his end of the bargain Tuesday afternoon, according to the city's appellate attorney, John Knox.
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"That is the reason I voted no," he said. "The judgment is over the top."
But other council members maintained they were making the best of a terrible situation.
"We all agreed that we should allow 129 homes on that property. It is my hope that we never have to go through anything like this ever again," said Councilwoman Marina Fraser, who added that Beachwood has been the hardest chapter in 150 years of the city's governance.
"I am so happy that the city reached this settlement with (Keenan)," said Councilwoman Naomi Patridge, reading from a prepared statement. "I understand we can't please everybody."
The announcement of the deal brought audible gasps from some in the room.
The deal requires passage of AB1991, an Assembly bill put into play by Peninsula legislator Gene Mullin. State Sen. Leland Yee has pledged to pass a similar bill in the Senate. It allows the unusual agreement and bypasses regular state environmental laws. A statement issued simultaneously by the city claims the legislation would not be precedent setting and would only affect Beachwood.
City officials have had few options in the wake of the U.S. District Court's severe Beachwood decision, which awarded $36.8 million to plaintiff Keenan, and later added another $3.5 million to cover Keenan's legal fees. If paid in full, the judgment would have cost approximately four times Half Moon Bay's annual operating budget, and could have bankrupted the city.
Half Moon Bay officials maintained they would begin the appeal process while seeking negotiations to settle the dispute. City attorneys filed notice to appeal the decision on March 26, one day before the deadline. Tuesday night they pledged to cease that effort.
The city had contended that U.S. District Judge Vaughn Walker made numerous errors when he rebuked the city machinations that resulted in a taking of the property.
Knox had said the appeals process could take two years to decide, a course that would have resulted in further hefty legal fees, and possibly requiring the city to float a bond to proceed. Half Moon Bay has already spent approximately $5 million for legal representation for the Beachwood dispute.
Since the court ruling in November, Keenan had said that he is open to settling the land dispute, arguing that Walker's decision would hold up in an appellate court.
Keenan was not at Tuesday's meeting, but the city's statement included a quote from the developer: "I am pleased we were able to reach a reasonable settlement that benefits everyone. We now have a compromise that allows development and takes into account the unique facts present here."
Located east of Highway 1 and north of downtown, Beachwood was originally approved for a 97-lot subdivision in the 1970s.
Current council members have been reluctant to assign blame for the legal dilemma, but the November court ruling found a clear culprit: the city's past elected officials. In his judgment, Walker blamed the city for creating the same conditions that resulted in an inverse condemnation of Beachwood.
The property, once worth tens of millions of dollars, plunged in value to approximately $2.2 million, the court ruled, after a series of land-use decisions by the city resulted in wetlands unsuitable for development.
Back in 1990, the city approved a plan to develop the Beachwood land. Tuesday's agreement revives that original deal. Back then, the city found the 24-acre housing project met with existing land-use regulations and granted a "vesting tentative map," meaning the housing development met the city's general criteria and could proceed.
But the project was stalled the following year because the city had issued a moratorium on construction that required new sewer permits. The moratorium wasn't lifted until seven years later. Meanwhile, developers were assessed to pay for a series of costly expansions to Highway 1 and to nearby water drains and sewer plant.
After hiring three separate consultants to assess Beachwood, the city decided to deny the owners' request for a Coastal Development Permit. Citing new wetlands definitions from the U.S. Fish and Wildlife Service and the California code, the council believed 17 areas on the property were protected wetlands.
Already having spent $1.75 million on improvements for Beachwood, Keenan sued over the decision, arguing that the city itself created the wetlands. San Mateo Superior Court Judge Rosemary Pfeiffer sided with the developers, ruling that the disputed areas on the site were not actually wetlands.
The city was also ordered by the court to issue a CDP for the project. Believing the judge had misread the city's Local Coastal Program, the council issued the ordered permit while simultaneously appealing the decision.
In early 2005, the California Court of Appeals ruled in favor of Half Moon Bay, resulting in the most recent spate of court activity revolving around Beachwood.
Review Managing Editor Clay Lambert contributed to this story.
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