Lawsuit Settlement May Bankrupt City

After denying plans for a subdivision, the city of Half Moon Bay, California, was sued. The city lost and now must pay a settlement of nearly $40 million -- more than three times the city's annual budget. Many worry the city may have to fold.

"Under the worst-case scenario, officials say, Half Moon Bay would become the first Bay Area city forced to dissolve, and the coastal town's land would become an unincorporated part of San Mateo County."

"Members of the City Council say that's unlikely, and they plan to vote at a public meeting tonight to retain an appellate law firm and a financial consultant to advise them on how to tackle a court judgment that is more than three times Half Moon Bay's $10 million annual budget."

"The dilemma arose from a long-running dispute over a 24-acre parcel just east of Highway 1 that is flanked by housing developments, spotted with trees and choked by 6-foot-tall weeds."

"The property, known as Beachwood, is owned in trust by Palo Alto developer Charles "Chop" Keenan, whose trustee bought it in 1993 for $1 million in a foreclosure sale and planned to build an 83-unit residential subdivision."

"The city had given tentative approval to a previous owner for the development but opposed the new plan, saying protected wetlands had appeared on the property. Keenan's trustee sued."

Full Story: Half Moon Bay grapples with $36.8 million judgment against it

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