State won’t appeal $25M judgment in favor of Huntington Beach in Waterfront Loan case

The Waterfront Beach Resort on Pacific Coast Highway, pictured in March, opened in July 1990 in Huntington Beach.
The Waterfront Beach Resort on Pacific Coast Highway, pictured in March, opened in July 1990 in Huntington Beach.
(Scott Smeltzer / Staff Photographer)

A significant legal victory for Huntington Beach, which will bring more than $30 million total back to the city, was finalized this week.

The state Department of Finance indicated in a letter to city officials Monday that it will not challenge or appeal a California Superior Court judge’s February ruling that it owes about $25 million to Surf City in the so-called Waterfront Loan case.

In a related ruling last April, Judge James P. Arguelles said that the state owes Huntington Beach $5.2 million for a loan used in 2009 for the sale of the Emerald Cove senior citizen apartment complex. That number has been increased to $6.8 million after interest, Huntington Beach City Atty. Michael Gates said.

“This is the kind of case, back when we filed it in 2018, that many said was an improbable victory,” Gates said. “So many other cities had tried their hand in court on these very same issues and lost ... For the court to find in favor of the city, obviously we think that is the right decision, and [are] just overall very, very happy.”

In 1988, the Huntington Beach City Council, then acting as a local redevelopment agency, authorized the $22.4-million Waterfront Loan Redevelopment Project, one of several taken out by the city to spur development and bolster property taxes in the “Main-Pier project area.”

In the years that followed, the Waterfront Beach Resort and the Hyatt Regency Huntington Beach Resort & Spa were developed. The Waterfront Beach Resort opened in 1990, and the Hyatt Regency Huntington Beach Resort and Spa followed in 2003.

The state decided to halt redevelopment agencies in 2011, but Huntington Beach never saw that money paid back. The city ended up suing the Department of Finance in 2018, for up to $75 million in reimbursements.

In his more recent ruling on Feb. 27, Arguelles ordered the Department of Finance treat the Waterfront Loan as an enforceable obligation.

The total amount coming to Huntington Beach in the most recent ruling is the original $22.4-million loan plus interest, for a total of about $25 million.

“I am grateful for the diligent and hard work of the city attorney and his staff,” Huntington Beach Mayor Tony Strickland said in a statement. “Like so many in our community, I find this to be one more reason why we are proud of Huntington Beach — we fight for the community, and we win.”

Gates said nearly all of that money from the most recent ruling goes in the general fund.

“I think there might be some more interest on that too,” Gates said. “All in, it might get us to approximately $32 million.”

There were nine other property loans in the 2018 lawsuit, but Arguelles ruled last year that the city didn’t demonstrate that they qualified as enforceable loan agreements.