Ventura Port District Struggling to Pay $15.6-Million Judgment : Courts: Though unlikely, the agency could be forced to sell off public property to satisfy debt to bankrupt developer.

Almost two months after an appeals court upheld a $15.6-million judgment against the financially strapped Ventura Port District, officials are still scrambling to figure out how to pay it.

The judgment was awarded to Ocean Services, a bankrupt development company that successfully sued the district for not acting in good faith during negotiations of the Harbor Village development.

“They’re going to have a collection problem,” General Manager Richard Parsons said. “We just don’t have the money.”

In 1979, Ocean Services had signed an agreement with the port district to develop part of the harbor by building, among other things, an aquarium, a restaurant and retail facilities.

According to court documents, the port district did not reveal that it had an agreement with another developer prohibiting the construction of retail facilities at the harbor. A former harbor general manager had repeatedly assured Ocean Services officials that the conflict could be resolved, and the company went forward with the Harbor Village development.

Harbor Village is a complex of about 50 retail shops and restaurants that surround more than 1,800 boating slips at Ventura Harbor. Port district officials, who have appealed the judgment to the state Supreme Court, say the harbor has a vacancy rate of about 15%.

By the time Ocean Services went bankrupt in 1987, the company had incurred $13 million in net operating losses, court documents said. Parsons argues that the port district did nothing wrong and the company went bankrupt because of financial mismanagement.

“This whole saga is just unbelievable,” Parsons said. “Nobody could have predicted how it would have ended up.”

The state Court of Appeal upheld the judgment in May. The initial award was made in September, 1990. In the next few months, the state Supreme Court will make a decision on whether to hear the case.

The lawsuit is being pursued by a company called Ventura Group Ventures, largely comprised of former Ocean Services shareholders.

“There’s a lot of ways they can come up with the money,” said Dewitt Blase, an attorney for the group. “They have property that can be sold. There are possible installment payments. We have no present intention of taking anything less than what we’re entitled to.”

Most of the district’s income of $1.8 million comes from leasing boat slips and properties around Ventura Harbor. The district owns 152 acres of land and 122 acres of water--most of which is leased.

The district also owns a 20-acre parcel at Schooner Drive and Anchors Way that is vacant, Parsons said. District officials later plan to develop a hotel or apartment buildings on that land, he said.

“Those lands have been acquired for a public purpose, and they’re supposed to be developed for a public purpose,” Parsons said. “We don’t believe the law requires us to dispose of property to satisfy judgments.”

Legal experts and attorneys contacted by The Times agreed that a public entity such as the port district enjoys more protection than a private company would have in the same situation.

A private company would be liquidated and its assets sold, but the port district will probably be able to continue operating the harbor, said Pat Nave, an attorney for the Port of Los Angeles.

“I’m sure the creditors couldn’t get to the lands; the public’s interests in those lands don’t go away,” Nave said.

Nave said the port district may have to use some of its taxing and assessment powers to pay the judgment.

“There have been cases in which towns have had to raise special assessments to pay a judgment,” he said.

Parsons said the judgment would not affect the operation of Ventura Harbor. The district’s main assets are the land it owns and Harbor Village, which has an $8.5-million debt that would be unappealing to a buyer, he said.

Samuel L. Bufford, a law professor at USC and a federal bankruptcy judge, said the port district probably will pay less than the $15.6-million judgment it owes.

Both sides will probably negotiate a lower settlement that will be paid out in installments, Bufford said.

“It’s just a question of what both sides are willing to live with,” Bufford said.

The port district may even file for bankruptcy, Bufford said. “It doesn’t happen that often, but it’s possible that they might do it to buy some time to negotiate,” he said.

Parsons said the district has not ruled out the possibility of filing for bankruptcy, but cautioned that it has not been seriously considered yet.

“You can’t rule out any options,” Parsons said.

The most likely scenario is a lower settlement paid out over a period of time, Parsons said.

“They’ll do a lot of huffing and puffing initially,” Parsons said. “But the money just isn’t there.”

Parsons predicted that funds for the judgment will be paid out of the port’s operating budget, which has already been cut this year.

“They’re going to want as much as they can get now,” Parsons said. “We’re going to want to give as little over as long a period of time as possible.”

Attorneys for Ocean Services insist that the port district has some assets.

“They’re not broke,” said John Johnson, who represents about 20 investors of Ocean Services. “They have income off the operation of the harbor, they have taxing authority, they have the power to raise money by assessment. They’re just running around screaming that the sky is falling.”

Johnson said he would not look too favorably on a long period for paying the judgment. Three of his clients have died already, he said.

“They’re just trying to get back money that they invested 13 years ago,” Johnson said.

Ocean Services and the port district began their relationship amicably about 14 years ago.

In 1979, Harbor Village was little more than sand dunes where sea gulls gathered. Montecito businessman Edward K. Jenks formed Ocean Services to develop the 32-acre parcel into a shopping, dining and boating area.

Port district officials thought it was a good idea and issued $9.5 million in municipal bonds to help pay for the construction.

The agreement called for Ocean Services to repay the bonds to Bank of America, but held the port district liable if the development company defaulted.

In 1987, Ocean Services filed for bankruptcy and defaulted on the loan.

“We were left holding the bag,” Parsons said.

After years of negotiations with the banks who foreclosed on Harbor Village, port district officials this year assumed ownership of the complex, Parsons said.

The village generates about $784,000 a year, which goes toward paying off $8.5 million in loans, Parsons said.

The multimillion-dollar judgment will be another albatross for the district to bear in its struggle to right itself financially, Parsons said. The district’s past financial problems will also make it difficult to secure any kind of loan to help pay off the judgment, he said.

“I don’t have the answer for how we’ll pay it,” Parsons said. “But we can’t ignore this. We’ll have to deal with it somehow.”