Developer Says City of Martinez May Face Bankruptcy, Taxpayers Stuck with $35 Million Bill

Martinez, Calif.  —  The City of Martinez’s refusal to honor a legally binding settlement with a Contra Costa County real estate developer may cost taxpayers more than $35 million in damages, forcing the City into bankruptcy.

DeNova Homes warned City staff and the City Council this month that it has run out of patience with the City’s failure to meet the terms of a settlement agreement entered into in July 2019 to build the 65-home real estate development “Traditions at the Meadows” at the site of the former Pine Meadow Golf Course.

“We want the City to live up to a legal settlement, and that includes allowing the housing project to start,” said Dave Sansom, founder and CEO of DeNova Homes.  “We don’t want to force the City into bankruptcy, but they leave us with no choice by refusing to honor a legally binding agreement that they themselves approved and signed.”

DeNova has lived up to all terms of the agreement which were incorporated and mandated through a Judge’s orders. Despite the City’s legal obligations, which have been in place for more than 15 months, the City and staff have purposely stalled approvals, costing DeNova significantly, the company said.

“The City’s failures here have put residents at great economic risk,” said DeNova Vice President and General Counsel Dana Tsubota.

“The City’s violation of the settlement agreement has forced DeNova into the position filing a lawsuit to pursue its rights. The suit seeks damages resulting from the City’s delay, which stand at $35 million but will continue to rise if the City continues to withhold the permits needed to construct the development that was agreed to in the signed settlement agreement,” she added.

Adding fuel to the fire, DeNova executives discovered that the City of Martinez’s own staff “has negligently withheld material information from the City’s elected leaders as well as from our company,” according to a letter from DeNova to the City Council dated January 6, 2020.

The Contra Costa County Flood Control and Water Conservation District sent a letter to the City of Martinez on Aug. 27, 2020, which City staff kept secret from both the developer and the City Council, DeNova said in its letter to the City.

DeNova said the letter provides clear and demonstrable proof that there are no drainage issues resulting from the project. City staff has used this claim to drag its feet on fulfilling its obligations to DeNova.

“The letter provides clear and demonstrable proof that there are no drainage issues, which City staff has falsely claimed was the source of delaying the development, including issuing the grading permit and recording the final map for the Traditions at the Meadows development (formerly Pine Meadow Golf Course).

The legal filing by DeNova will seek $35 million plus other damages.  The City of Martinez is placing itself in the same position as City of Half Moon Bay, which lost a similar lawsuit and faced bankruptcy for its failure to honor a legally binding development settlement with a housing developer there.

“DeNova Homes simply wants the City to honor its obligations,” Sanson said.  “It’s is time for the City to recognize the bedrock principle of our country, the rule of law.”

Editors Note:

Response from City of Martinez

In a response, Michael G. Colantuono, who is the legal counsel for the City of Martinez issued the following statement on behalf of the city:

DeNova is suing the City over its claim that the City is obligated to approve its proposal to convert a golf course into 65 homes and a park  by a Settlement Agreement which required the City only to “consider” DeNova’s project. The City supports the project, but has concerns about important details:

• The County Flood Control District has confirmed the project will flood Vine Hill Way in major storms for as much as 70 minutes at a time.
• The Police Department is concerned that the proposed park design will endanger children because a large, artificial hill will prevent police from seeing into the site and will invite children on bikes and skateboards to take flying leaps.
• The drainage improvements will be expensive to maintain and DeNova wants to impose that cost on City taxpayers.

The City is puzzled that DeNova wishes to argue this dispute in the media. DeNova accepted the City’s proposal – encouraged by the Court – to mediate this dispute with the help of a professional neutral. We look forward to continuing constructive dialog to resolve these issues.

Again, the City supports the project, but has no intention of imposing a badly designed project on the community it serves or those who buy homes from DeNova.