The City’s stance is that they do not owe the some-odd $55 million dollars…

Hercules: Developer overcharged city for land
By Tom Lochner

A developer acted in bad faith by overcharging the city of Hercules by at least $50 million for land used for streets, parks and affordable housing at the Victoria By the Bay subdivision, the City Council has found.

A spokeswoman for Hercules LLC, developer of the 880-home subdivision, said the council’s finding at a special public hearing last week is inflammatory, unfair and “invalid from both an administrative and legal standpoint.”

The city says Hercules LLC seeks reimbursements that are excessive by $50 million to $64 million. The city did not make any payments to the developer in the past two years, City Attorney Mick Cabral has said.

The developer sued the city in Contra Costa Superior Court last December, contending that the city breached a 2001 development agreement and seeking full payment for the set-aside land. Last week, the council, resuming a public hearing begun Sept. 16, noted that an audit confirmed the developer had substantially overstated its actual reimbursable costs.

“Considering the gross misrepresentation of costs, the City believes Hercules LLC’s conduct falls short of good faith as defined by California law,” the city said in a news release.

“We think the city is unable to distinguish between bad faith and a contract dispute,” said Jessica Crow, corporate communications manager for ProLogis/Catellus, the parent company of Hercules LLC. “How disappointing that they’re escalating it to this level.”

The main dispute revolves around the fair-market value of the set-aside land, the result of divergent appraisals by the city and Hercules LLC.

“They came up with about $35 million; we came up with more than $90 million,” Crow said.

“This comes down to a contract dispute,” she said. “In our opinion, the allegation that Hercules LLC misrepresented the sums owed to us is inflammatory.”

She chastised the city for “unilaterally ceasing payments.”

“This almost begs the question of who is acting in good faith.”

The suit is scheduled for trial May 18 in Contra Costa County Superior Court in Martinez.