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.