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How Should Half Moon Bay Spend $10 Million?

Arbitration victory sparks debate at October Half Moon Bay City Council meeting on how to spend millions.

After struggling with debt for years, the city of Half Moon Bay now faces a refreshing question: How should it spend $10 million?

The money comes from an arbitrator’s ruling in favor of the city, which sought reimbursement from an insurance company for the cost of buying 24 acres to settle a lawsuit. Landowner Charles “Chop” Keenan of Palo Alto sued the city in 2000 after drainage problems led to the emergence of wetlands that made his property off Highway 1 — known as the Beachwood site — unfit for development.

The $10 million awarded last month by arbitrator Edward Panelli, a retired state Supreme Court justice, amounts to roughly half of the city’s annual budget. It is unclear when Half Moon Bay will receive the money, but the City Council has begun to discuss options for spending it.

At an Oct. 4 council meeting, some members pushed for moving ahead with capital projects that were deferred while the city took steps to avoid bankruptcy.

“If we could get back on track [financially], it would be so nice to have the streets paved even every four years, rather than every seven years,” Councilwoman Naomi Patridge said.

Vice Mayor Rick Kowalczyk said, “We have a major bridge in town that is seismically unsafe. We don’t have money to repair it.” In addition to bolstering the Main Street Bridge, Kowalczyk listed a series of projects that are underfunded, including streetlight improvements on Main Street and highway safety enhancements.

Another option is to pay down the city’s bond obligations. Half Moon Bay issued a series of bonds to fulfill terms of the $18 million Beachwood settlement. (The city also recovered $5 million from a liability plan run by the Association of Bay Area Governments.) One type of bonds, known as Series A, total $5.8 million; the other, Series B, amount to  $10.9 million.

These bonds were approved after a court hearing in July 2009, and each has a distinct payback structure.

Half Moon Bay will owe principal and interest on the bonds until they are fully paid off in 2040. If not paid off by then, the city will have to pay just over $8.3 million, after interest, on the Series A bonds. The Series B bonds will require $34 million in payments.

There are some options to save money through earlier payment methods, however. Paying back the Series A bonds by 2014 would save the city an estimated $1.5 million. Another option is to pay back the Series B bonds in full by 2019, saving an estimated $14 million from interest payments.

Using the $10 million arbitration award to pay off the bonds sooner rather than later saves millions of dollars in the long run, City Manager Laura Snideman said.

There also have been legal issues with the bonds. Earlier this year, Half Moon Bay ran into trouble with the IRS for using the Series B bonds, issued by Build  America, to purchase the Beachwood land. The IRS ordered Half Moon Bay to pay an extra $1.38 million on the bond issue.

Half Moon Bay resident Harvey Rarback, a retired physicist who is running for a City Council seat next month, told the panel at the Oct. 4 meeting, “I think the only intelligent use of this windfall is to pay down the bonds as soon as possible in any way that makes sense.”

Councilman John Mueller, who is seeking re-election, said the decision is not so clearcut. “I think we will be reducing the load of this deficit over time,” Mueller said. “If the public has a fear we’re going to waste [the $10 million] maybe we could put it in an escrow account and see how we can manage it.”

Also on the Half Moon Bay ballot on Nov. 6  is Measure J, which seeks to raise the city’s sales tax by half a cent for three years. If approved, the extra annual revenue, estimated to be $867,000, could help fund needed capital projects, according to city officials. 

“It is important to us that people who visit Half Moon Bay leave a little bit of their pocketbook with us,” Kowalczyk said. “We benefit from tourism. A half-cent sales tax will allow us to capture some of those tourist dollars. We need to recoup some of those dollars to pay off things in our community.”

This article first appeared in Peninsula Press, a hyperlocal news site powered by Stanford University’s Graduate Program in Journalism.

 

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Gregory Watson October 24, 2012 at 02:08 PM
Pay down the debt and create a sustainable future.
George Muteff October 24, 2012 at 05:39 PM
Until the money is 'in the bank', it seems a bit premature to 'spend' it. That said, however, if/when the $10 Million is 'in the bank', use it to pay down the astronomical debt the City has. There is nothing wrong with taking our time to maximize the benefits of the award. It's OK for the money to sit idle, in the bank, until maximum benefit can be identified and pursued. Further, it would be a good idea to keep those funds segregated, once received, so that every dime can be seen by all until gone. Transparency and accountability would be well served by doing so. I agree with Mr Watson, although he's actually addressing two separate actions. Both are the proper course of action for the Council and for the City.
John Charles Ullom October 24, 2012 at 05:42 PM
Why does our City Council use scare tactics and flat out lies to get what they want for us? The following quote is simply not true: 'Vice Mayor Rick Kowalczyk said, “We have a major bridge in town that is seismically unsafe. We don’t have money to repair it.”' This is disinformation of the most insulting kind. The City of Half Moon Bay had secured 95% of the funding for the Main Street Bridge as far back as December 2011 and Councilman Rick Kowalczyk knows it: -- http://www.hmbreview.com/news/money-in-hand-city-prepares-bridge-repairs/article_3cbd400a-269e-11e1-bd4b-0019bb2963f4.html The same disinformation is asserted by the proponents of Measure J. Read here how the Main Street Bridge is used to trick into supporting a 1/2 cent sales tax being imposed on all of us. Here is a quote from the rebuttal to the anti J argument. "FACT: Our capital budget is significantly under-funded, which prevents us from performing much needed maintenance and special projects. We are not able to effectively maintain city streets and sewers or pay for projects like the replacement of the seismically unsafe Main Street Bridge." -- https://www.shapethefuture.org/elections/2012/nov/documents/14_ENG_M_J.pdf There is an option to pay off the Build America Bonds early: -- http://startthinkinghmb.org/Calamity http://startthinkinghmb.org/Beachwood Sadly and as usual, the Half Moon Bay City Council is being far less than honest with the people they each promised to serve.
pae October 24, 2012 at 09:02 PM
“If we could get back on track [financially], it would be so nice to have the streets paved even every four years, rather than every seven years,” Councilwoman Naomi Patridge said. So much for serious priorities! Nothing says the streets need to be paved that often, just that it would be "nice!" Most street paving I've seen lasts a whole lot longer than 4 years; if it doesn't, there's another problem. Note that she says nothing about the city's huge debt resulting from the Council's bad decision making, or paying it down as soon as possible to take the burden off the taxpayers. However, the Vice Mayor has another solution to all the financial problems: “It is important to us that people who visit Half Moon Bay leave a little bit of their pocketbook with us,” Kowalczyk said. “We benefit from tourism. A half-cent sales tax will allow us to capture some of those tourist dollars. We need to recoup some of those dollars to pay off things in our community." Presumably he thinks the rest of the Coastside residents should leave their pocketbooks in Half Moon Bay as well. Sorry, Pacifica is closer, and my hard earned grocery money would go there if this sales tax passes.
Brian Ginna October 24, 2012 at 09:39 PM
Ullom is the one using scare tactics. Off the deep end for sure.
John Charles Ullom October 24, 2012 at 10:27 PM
Apparently Vice Mayor Kowalczyk is unaware if just how little is being left behind by the tourists these days. Shops are closing down at a rate of more than 1 per month. Revenue is off by more than 40% for everybody in Zaballa Square compared to 2007. And it has been that way since 2007. Vice Mayor Kowalczyk asserts that tourists will be the ones leaving a little bit more behind. Does not sales tax apply to gasoline? If so and it does, we all get to pay around 2 cents more per gallon. Do you shop at Ocean Shore? Do you shop at the Bicycle Emporium? Do you smoke cigarettes? Do you buy food for your pets? Do buy toys at my sisters toy store? Do you buy furniture at Abode? Do you drink beer? Vice Mayor Kowalczyk just doesn't get it. We have over 10 thousand consumers here on the Coastside and he pretends they won't be impacted by the Chump Change tax. He does not even acknowledge they exist. They will say anything folks. See how they use the crumbling Main Street bridge as a tool to scare you into supporting J even though each of them knows that the funding is in place. They are not evil or corrupt. They are far more fiscally dangerous than that. They believe their own propaganda. They know that they are not responsible for what goes wrong and they appropriate credit for what goes right even when we made them do it.
George Muteff October 24, 2012 at 10:53 PM
"Does not sales tax apply to gasoline? If so and it does,..." you sure about that John? I might be mistaken, but I do not believe that is correct. It is my understanding that the gas tax(es) are a different animal. Speaking of animals, one of the ways I was taught to understand if something is taxable with a sales tax is - if you can eat it, it is not taxable. That, of course, doesn't apply to service; restaurants might be a good example of that. I am neither making the case to support the measure or oppose it here; just trying to bring some clarity. In the end - on election day - as I have said before, I believe this tax measure is and will prove to be a referendum on what local voters think about this Council's demonstration (track record) of fiscal responsibility. It's not so much the receiving side as it is the expenditure side that will sway locals one way or the other (IMHO). We'll know in 2 weeks. In the meantime - Go Giants!!!!!!!!!
Cid October 25, 2012 at 01:21 AM
Suoervisor Don Horsley told Seal Cove residents that County road money comes from the Gas Tax. Not sure of HMB. MEASURE J..NO WAY! Bad for business in Half Moon Bay!
Pearl October 29, 2012 at 01:22 PM
I drive through the Arleta Park neighborhood twice a day and those streets were not in need of costly paving. Lots of money was spent on repaving the whole neighborhood. I would have thought Filbert and Kelly would be repaved. They were bad. Kelly, to my surprise wasn't repaved, though a few months ago someone (could have been a neighbor, It wasn't done very professionally) dumped a pile of asphault in a few potholes and made them more bumpy than they were in the first place. This waste of money and a few other things the city wasted money on makes me think the city should be fired because we can't trust them to spend our money on things we really need. It almost seems like they have a mental problem or something.
Cid Young December 31, 2012 at 08:04 PM
They should stop wasting money and pay down the Beachwood debt that they OWE, and due to malfeasance lost some of the Federal Subsidy on the interest payments. The 10 million is NOT a windfall, it is an insurance settlement.

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