Friday, Jan. 06, 2012

Developers seeking $40 million in damages from City of Los Banos

Stonecreek Properties alleges city failed to honor annexation promises

The city has three weeks to respond to a revamped complaint from Stonecreek Properties in a nearly $40 million lawsuit stemming from a dispute over a proposed annexation.

Stonecreek Properties filed a $39.8 million lawsuit on Aug. 1 alleging that through negotiations in 2002 the city agreed to annex hundreds of acres for two projects known as Stonecreek South and Stonecreek North.

The city fulfilled its obligation to the south project, which is now part of the city and includes the area south of Target and the former Lowe's building.

According to city records, Stonecreek North was originally an 850-acre project at the corner of Pacheco Boulevard and Badger Flat Road, across the street from Wal-Mart.

It eventually became a 362-acre plan that included housing for seniors, medical offices and retail stores. Stonecreek Properties purchased land in preparation for the annexation.

On May 11, the project was at the Planning Commission level. Commissioners recommended denial by a 6-1 vote after city staff raised concerns about added responsibilities for the city's Fire and Police departments and the maintenance of infrastructure, such as new sewer and water lines for the annexation.

On Oct. 20, a Merced County judge declared the lawsuit did not have a proper cause of action. Michael Dyer, Stonecreek's lawyer, filed an amended complaint on Dec. 27. It states that in 2008, City Manager Steve Rath and the Planning Department "made a series of promises upon which plaintiffs relied upon to assist and recommend annexation of the property to the City Council."

The complaint further states, "the city began a series of delay and blocking actions to make it impossible to bring the project to the City Council."

Stonecreek said that stall tactics included requesting additional funds for an environmental impact report, putting the project on hold pending approval of a general plan and suggesting cutting the annexation in half and removing residential portion of the project.

City Attorney William Vaughn said Los Banos has until Jan. 27 to answer Stone Creek's allegations. He said a response will be filed and he does not foresee a settlement.

"They don't have a claim and the city doesn't have $39 million," Vaughn said.

Dyer was unable to be reached for comment.

Enterprise reporter Corey Pride can be reached by phone at (209) 388-6563 or by email at cpride@

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