The short version of the story goes like this: Developer buys land for $1 million. Wetlands are found on property. Developer says wetlands are man-made, caused by City ten years before he bought the land. City says land has always been wet. Judge writes long, sarcastic, illogical ruling requiring City to pay Developer $38.6 million. For starters.
How much money is that? The developer paid $1 million for the land in 1993 so the $38.6 million represents a 3760 percent increase. That’s an annualized rate of return of around 30% (i.e. a 30% increase in value each and every year).
Oh, that seems fair.
The average home on the coastside is probably worth around $750,000. Doing the math backwards–using the same rate of return–these number suggest that that same house was worth a little more than $19,000 in 1993.
Oh, that seems right.
Half Moon Bay doesn’t have that kind of money. The $38.6 million–which will increased by millions after interest, attorney’s fees, etc. are added–is almost four times the entire yearly city budget.
What does the amount look like in terms of a 30-year loan? At an interest rate of six percent that puts us at a payment of just under $250,000.
That’s a quarter million dollars. A month. For thirty years.
The total loan amount would add up to nearly eighty-four million dollars.
So let’s summarize. A judge decides that the fair market value of the land (assuming it was buildable) is almost forty times what was paid for it. He gives the developer a rate of return that would impress early stockholders of Apple. He places this enormous financial burden on a tiny city with no money to pay.
Oh, that’s not grossly excessive. Not at all.
In this video citizens react at a hastily called meeting of the Half Moon Bay City Council as they begin to struggle with the ramifications of this ruling. I’ve edited the video to focus on the citizen’s comments.
Video by Darin Boville