With a successful insurance lawsuit expected to net Half Moon Bay $10 million, city leaders now face a different task for convincing voters their local government needs a sales tax increase to provide more money. Elected leaders say the revenue from the lawsuit doesn’t change the need for a citywide sales tax increase, but they are unsure whether voters will agree.

Half Moon Bay voters go the polls in November to decide the fate of Measure J, a half-cent sales tax hike that would provide an estimated $867,000 per year for city infrastructure projects.

The news that Half Moon Bay will likely have an influx of $10 million more than originally anticipated may change the appetite for a tax increase. Convincing voters that the city still needs that extra revenue could now be an uphill fight, said Councilman Rick Kowalczyk.

“It’ll be more challenging, but we have more than $10 million in needs,” he said. “I know this is a large amount, but it pays off a large debt and we have a large need.”

Mayor Allan Alifano pointed out that the city did not have the money in hand yet, and until that happens local leaders needed to continue making the case for the sales tax. But if the city did obtain the lawsuit money in a timely fashion, then the sales tax could be seen as unnecessary, he said.

“I don’t really have a good answer,” he said. “I think it’s premature for any of us to say the sales tax is off the ballot yet.”

Half Moon Bay leaders intend to convene a special meeting sometime next month to gather public input on how the money should be spent. Before that meeting, city officials will prepare a series of spending recommendations for the public to consider.

All elected leaders contacted by the Review recommended that some portion of the lawsuit award go toward paying off the city’s bond debt resulting from the longstanding Beachwood settlement. The city issued more than $15 million in judgment obligation bonds in 2009 to pay an $18 million settlement obligation resulting from the Beachwood suit.

Those bonds were scheduled to be paid off over 30 years, at a total cost of more than $32 million, but the city also has the option to pay off some of the bonds early to preclude mounting interest payments.

The Beachwood case became the grounds for the city’s civil suit against its former insurer, Insurance Company of the West, which provided liability coverage for the city in the early 1990s. Attorneys representing the city announced last week that retired judge Edward Panelli had decided in arbitration that the insurance company must pay the city $10 million.

City officials explained that there is still an outside chance that legal award could be delayed or stopped entirely if lawyers for the insurance company decide to challenge the case. But that outcome is extremely unlikely, wrote City Attorney Tony Condotti in an email, explaining that insurance firm would essentially have to prove egregious errors, corruption or fraud to undo the decision.

ICW representatives did not return calls for this story.

Attorneys for the city will also request the arbitration judge order ICW to repay the city’s legal costs, estimated around $100,000, along with awarding damages for acting in bad faith. Condotti said the case could take as long as a few months to fully resolve.

(4) comments

August West

"Take the 10 million plus interest and pay off Beachwood Debt. "

Some of the bonds had 2 year calls, some had 5 year, some had 10 year. Some may not be callable yet. The City better be able to give out details at October 2nd meeting.

George

Following-up on Mr Ullom's comments on this matter:
I agree. IF we do actually receive this $10 Million award as the City press release has stated, one would think there are plenty of places those funds could go - under 'normal' circumstances.

HMB is not currently existing under 'normal' circumstances. The City has made 3 annual payments toward the Beachwood debt, which is approximately over $35 million in total - less the three payments made. HMB is also over $20 Million in the red on unfunded liabilities to CalPers. We could use that same $10 Million five (5) times just for those two debts and still need more - and the Calpers debt continues to grow. At least Beachwood is locked in; it's not a moving target.

I agree with JCU that we should pay off as much of the Beachwood debt as we can. What's left over, if any, should be put aside for future Beachwood payments or sent to CalPers to reduce City debt there.

I am anxious to see the City's list when available, just to see what they provide; but we have an annual budget of approximately $10 Million and our debt to just those two creditors accounts for over $50 Million!

We need to adjust our priorities and focus. With debt exceeding 5 times our annual budget, any "found money" should be used to reduce that number.

Moss Beach Mom

I'm glad I live in Moss Beach so I don't have to vote on the sales tax issue. My opinion is that it's not necessary since the City received a LARGE chunk of change re: Beachwood suit. But, I don't run the numbers and I don't have a say in the matter other than I work in HMB and I think additional taxation would hurt local businesses.

John Charles Ullom
John Charles Ullom

No, the sales tax is not required.

Take the 10 million plus interest and pay off Beachwood Debt. The reduction in payments will roughly approximate the revenue that they hoped to confiscate from us with the Chump Change tax.

The city issued more than $15 million in judgment obligation bonds in 2009 to pay an $18 million settlement obligation resulting from the Beachwood suit.

Wrong. They issued most of that debt in Build America Bonds. As the Mayor said, that trick resulted in a federal investigation and could have bankrupted our city.

Half Moon Bay leaders intend to convene a special meeting sometime next month to gather public input on how the money should be spent. Before that meeting, city officials will prepare a series of spending recommendations for the public to consider.

I wonder if the option of using every penny to pay off debt will be presented at that meeting.

Folks, we have to make them use this money to pay off the debt that has been incurred by them that we owe. We waste money on frivolous redundant emergency centers. We pay off judgments for reckless decisions.

Debt is our single most pressing problem. Not the bridge, or Smith Field, or the empty fiber optic conduit that we paid over 70 grand for.

Debt is what we are passing on to the children going to Kindergarten at Hatch.

We have an incredible opportunity to reset our city. We have to force those that want to spend our money to spend it wisely. There is no reason to think that anybody on the City council except Mayor Alifano, has learned anything from the blunders at the Kehoe Riparian Corridor and the use of money meant to create jobs to subsidize the purchase of a swamp.

We have to make them pay off our debt because otherwise, they won't.

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