Pierside’s Foes Protest Donor Tax Write-Off

The city’s largest land developer got a huge tax write-off in a deal involving public-access beach land and the Pierside Village development project, according to a citizens group.

The group, Huntington Beach Tomorrow, said the city allowed the Huntington Beach Co., the largest private landholder in the city, to claim a valuation of $3 million for oceanfront property previously valued at just $10,000.

City and company officials acknowledged that the assessed value of the land had changed but said there is nothing out of line in the arrangement. The deal allowed the Huntington Beach Co. to claim the higher value in exchange for donating it free to the city to make way for Pierside Village.

But leaders of Huntington Beach Tomorrow said the public was the loser in the deal because for the last 57 years the land has been a public easement--land that the public has a right to use--as a means to park and get to the beach. It would become commercial property under the city’s Pierside Village proposal.

The land at issue is a narrow strip--about two acres in total--that extends along the ocean from Main to Lake streets. Since 1932, the land has been a public easement to the city’s well-known beach and pier at Main Street and Pacific Coast Highway.

The city had long sought full title to the land in hope of using it for Pierside Village.

Maxwell’s Restaurant and a series of paved parking lots are now on the land. The project would relocate and renovate Maxwell’s and add two more oceanfront restaurants, plus a plaza with some small shops.

Huntington Beach Tomorrow and Save Our Parks, two citizens groups that advocate “managed growth,” have strenuously opposed the project. They hold that the proposed new commercial buildings would ruin the beach’s access and view.

In a newsletter mailed this week, Huntington Beach Tomorrow did not accuse the city or the Huntington Beach Co. of illegality in the land-gift deed. But the newsletter asked: “Did they (the Huntington Beach Co.) get a huge tax write-off for giving away nothing? . . . How could the value be $3 million when the city had it appraised at $10,000?”

Public documents on file in the city confirm that the Huntington Beach Co. claimed the $3-million valuation in deeding the tract to the city. But a company official, William Holman, said in an interview that the new valuation simply reflected the actual worth of the land.

City Administrator Paul E. Cook said that while the city would have never paid $3 million to buy the land, it did not contest the company’s higher valuation when the company offered the land as a gift.

“That was the price the company set on the land as a tax write-off, and I guess without any restrictions on the land, that’s the kind of price it could bring,” he said.

Cook noted, however, that the land does have building restrictions because it was dedicated as a public easement.

Holman, a project manager for the Huntington Beach Co., said in an interview that the company claimed a $3-million value because the land is worth that much, noting that it is strategically situated and virtually at the front door of the beach city.

“Three million dollars was the estimate because that is the value we placed on the property,” Holman said.

Cook said the $10,000 valuation placed on the property in 1986 reflected the strict restrictions on the land’s use. But he added that without such restrictions, the land would be much more valuable.

Proposal to Buy

Documents on file at City Hall show that the city sent the Huntington Beach Co. a letter, dated Feb. 27, 1986, proposing to buy that company’s partial ownership of the beach strip.

The letter, signed by then-City Administrator Charles W. Thompson, said the city had “received an appraisal of your interest in the property. . . . This appraisal, which the city and the (Redevelopment) Agency feel reflects an accurate and fair market value, concludes that the value interest is $10,000.”

That value, Thompson added, did not include oil or natural gas rights, which the city did not need to buy with the land.

Thompson’s letter said the city had been prepared to offer the Huntington Beach Co. $40,000 for the land. Thompson said the amount took into consideration money the company might have to spend in handling an eminent domain case.

The Huntington Beach Co. rejected the offer, but by December, 1986, according to the public documents, the firm offered to donate the surface rights to the city at no cost--provided that the city drop eminent domain proceedings. The company’s proposal also called upon the city to accept a much higher land valuation.

The city’s agreement with the Huntington Beach Co., dated Dec. 11, 1986, said the Huntington Beach Co. “values the real property at $3,000,000 and City does not contest the valuation of the property.”

The company retained the right to any oil and natural gas under the beach land. Holman said the Huntington Beach Co. frequently keeps mineral rights when it sells or donates land.

Huntington Beach Tomorrow’s newsletter questioned whether the company had actually given up all land surface rights in deeding the property to the city. The newsletter noted that one paragraph of the deed says that the Huntington Beach Co. “further excepts and reserves, the right to receive any sums, including rental, royalties or other payments, due or to become due under or by virtue of any lease, including without limitation any oil and gas lease or agreement affecting said real property.”

Can Company Collect?

Debbie Cook of Huntington Beach Tomorrow said that language raises questions about whether the Huntington Beach Co. could still collect part of any money from restaurants and other commercial establishments planned to be built on the land.

But Holman said the company “never had any interest in future rental conditions, nor do we now.”

Holman said the paragraph protects only the Huntington Beach Co.’s right to any oil and gas that might later be extracted from under the land.

City Atty. Gail C. Hutton similarly said she interprets the rental paragraph to affect only underground rights retained by the Huntington Beach Co.

Cook said Huntington Beach Tomorrow and Save Our Parks are still concerned with the city’s handling of the beach land, regardless of the explanations of the deed and $3-million valuation.

“The residents of this city own the rights to this (beach) land for recreational purposes,” she said.

She said Pierside Village would take away those public-access rights by commercializing the land and added that the two citizens groups will continue to oppose the redevelopment project.

City Administrator Cook vowed that the city will continue to work for the project and hoped to negotiate a settlement with the State Lands Commission, which is trying to block the development.

The State Lands Commission, which by state law owns and controls all the land from high tide to three miles out to sea, has said Pierside Village would restrict public access to the tidelands.