Harbor Square Lessee Behind in Payments

The developer of an ambitious and long-planned complex of offices, restaurants and a hotel on the parking lots flanking the County Administration Center have fallen behind in their payments to the county for the right to build on the valuable harborfront property, county officials said Tuesday.

And Chief Administrative Officer Clifford Graves’ decision to handle the sensitive issue without consulting the county Board of Supervisors has landed him in hot water with at least one supervisor.

Graves said Harbor Square Associates has not made its $25,000-a-month lease-option payment for the last two months.

He said he has notified the developer that the payments are past due but has not pressed to declare the partnership in default because of uncertainty surrounding the future of the project.

The developer could not be reached for comment Tuesday.

The $100-million Harbor Square proposal has been in limbo since March 26, when plans for it were rejected by the City Council. The city was given final say on the use of the county land as part of a dispute with the county over the property’s ownership.

“We’ve been working with the developer to determine what the next step is in terms of changes in the project the Board (of Supervisors) would approve, and changes the City Council would approve,” Graves said. “They’re concerned about the future of the project, and in light of the city’s action, there’s some uncertainty over there.”

Graves’ decision to handle the situation without involving the board has drawn the anger of Supervisor Susan Golding, who since taking office in January has led a fight to topple the Harbor Square proposal because she believes a more public use of the land might be found.

“I think it’s completely improper and irresponsible,” Golding said in an interview Tuesday. “I think the CAO (Graves) should have notified the board immediately on a project of this magnitude and this importance when a major developer has not met his payments. Simply because I am opposed to the project and he is not does not change the fact that we should enforce our contracts.”

Golding said she was particularly upset because other county officials have implied that her opposition to Harbor Square might leave the county in jeopardy of being sued by the developer for breach of contract.

“Here’s a bona fide contract the county has been very concerned about honoring,” she said. “The county has been in there, helping, and in return for that, Harbor Square Associates has not made its payments. As far as I’m concerned, it breaks the contract.”

But Graves said the developer is not officially in default on the payments until the supervisors declare it so. After such a declaration, the developer would have 30 days to bring the payments up to date or risk losing the contract, Graves said.

Other supervisors contacted Tuesday said they were not aware that the payments were in arrears. Supervisor George Bailey said the board was scheduled to discuss the project in closed session today.