Home Commentary Hayward: It’s my duty as mayor to defend city

Hayward: It’s my duty as mayor to defend city

Once again stories of the City’s legal fees are circulating. Those stories do not give you all of the facts regarding the City’s position and its defense of lawsuits which have been brought against it
 by others.


A case in point is the story about the legal fees that the City has spent to defend itself in the Fish
 House lawsuit. When I became your Mayor, I had the City staff evaluate all of the City’s leases
 so that I could be familiar with their terms and could ensure that both the City and our tenants
 were complying with those leases. One of those leases was the Fish House lease. Our review
 of that lease indicated that the rent being paid was not what was called for in the lease. Our 
tenants disagreed with our interpretation of the lease. As a result, the City issued a notice of
 default in November, 2013. Shortly after that, at the request of our tenant, our notice of default
 was withdrawn when they agreed that there were “legitimate issues which should be the subject
 of open and frank discussions” between the parties. A letter was signed by all parties agreeing 
to those discussions on December 10, 2013. Subsequently, in January, 2014, the City was 
sued. The city did not file any lawsuit against anyone. It goes without saying, however, that 
anytime the City is sued I have a fiduciary duty to respond to the lawsuit and to file any 
counterclaims which the law requires be brought in the same lawsuit. What has been left
 unreported is why the City continues to pay attorney’s fees to defend its position. Simply put, it is 
my duty as Mayor to defend the City and its taxpayers when suits are filed against it and to bring 
any claims on behalf of the City once someone else sues it. That is what I have done.

In 1985 the City entered into a 30-year lease for the land currently occupied by the Fish House 
and Atlas Oyster House. Since 1985 taxpayers have received $46,161 a year, or $0.10 per
 square foot, for the lease of the land. By way of comparison, the City receives $1.64 per square 
foot for the Maritime Place office land lease and $1.84 per square foot for the Maritime One
 office land lease at the Community Maritime Park, amounts which are 16 to 18 times higher per
year than the comparable Pitt Slip lease fee — and the Maritime Park office building leases are 
indexed to increase over their lifetime, unlike the Pitt Slip lease. Without question, the market
 rate for that city-owned waterfront property is many times higher. It was, and still is, our position 
that the current lease calls for additional rent and lease fees to take into account the value of this

Contrary to what some have said, we have never tried to force the renegotiation of the lease. 
We have simply tried to enforce what we believe to be the terms of the lease. The appellate 
court filed an opinion last week in favor of the tenant. Barring further action by the courts, the 
City will continue to collect a lease fee that is considerably below market value for the property
 and is less than what I believe is the rent called for in the lease. Unfortunately for the taxpayers, it turns out that the City entered into a lease in 1985 that could not stand the test of time, at least when it comes to protecting the interest of taxpayers with a fair return on the lease of the public asset.

What this means is that for the next 25 years the City will collect $46,161 a year for the lease of Pitt
 Slip, the amount that was paid beginning in 1985. We can’t fault the tenant for striving to 
maintain his favorable position, but we can point out that the City loses and residents foot the bill 
when city-owned property is leased for less than its market value. That is why we felt obligated 
to spend the money on attorney’s fees. Imagine if the City were paid rent of only $0.70 per 
square foot from the tenant, well below the current market rate. That equates to a little over 
$300,000 a year as opposed to $46,000 a year. Not only would the City receive enough money 
in one year to reimburse its legal costs, it would continue to receive that much annual revenue
 for at least the next 25 years.

As John Paul Jones said, “It seems to be a law of nature, inflexible and inexorable, that those
 who will not risk cannot win.” Reasonable people will disagree about how much risk to take, but if
 the taxpayers are the ultimate judge, they deserve to be presented with all the facts.