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APPROVE THE SETTLEMENT OF REDEVELOPMENT AGENCY OF THE CITY OF STOCKTON V. STATE OF CALIFORNIA DEPARTMENT OF TRANSPORTATION WITH PAYMENT BY CALTRANS IN THE AMOUNT OF $800,000
RECOMMENDATION
Adopt a resolution approving the settlement between the State of California Department of Transportation (Caltrans) and the Successor Agency to the City of Stockton Redevelopment Agency (Successor Agency) with payment by Caltrans in the amount of $800,000, which will resolve Redevelopment Agency of the City of Stockton v. State of California Department of Transportation (Caltrans) - San Joaquin County Superior Court Case No. 39-2010-00236302.
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Summary
The Successor Agency and Caltrans have negotiated a tentative settlement of the above-referenced case. The Successor Agency board has approved the settlement. The Oversight Board has discussed this proposed settlement in closed session, so it is now presented for approval by resolution.
DISCUSSION
Background
This matter arose out of the discovery of an abandoned rail spur under the Worknet site, located on Lincoln Street south of the intersection of Lincoln Street and Weber Avenue. The abandoned spur was uncovered during the construction of the Worknet project when the soil under the spur was excavated and petroleum pollution was found. Regent Development (Regent) was performing the construction of the building, and Regent agreed to remove the contamination on the Worknet site at the expense of the City of Stockton Redevelopment Agency (Agency). The Agency spent approximately $1,925,000 for the cleanup effort.
In September 2005 the Agency sued the railroads that were believed to have built and/or owned the spur in question in an effort to force them to pay for the remediation on the Worknet site and the two adjacent Agency-owned properties. Following a trial, a judgment was entered on July 1, 2009, which awarded $816,851.70 to the Agency as a partial recovery for the cleanup of the Worknet site, injunctive relief in the form of an order to the railroads to complete remediation of its contamination on the Worknet site and the adjacent Agency-owned properties to the south and north of the Worknet site, as well as its attorneys’ fees and costs.
The Court did not allow the Agency recovery against the railroads for the entire cost of the cleanup. The Court reasoned that some of the liability was attributable to the actions of Caltrans undertaken during the grading and construction of the Interstate 5 and Highway 4 interchange projects, which amalgamated contaminated soil from adjacent properties while realigning Mormon Slough and installing the railroad spurs (and drain pipe) at issue. The judgment against the railroads was ultimately overturned on appeal.
On May 4, 2010, the Agency authorized the filing of a suit against Caltrans. The Agency brought this action against Caltrans as a responsible party due to its prior ownership of the affected property during the petroleum release in question and its installation of the underground drain that carried the petroleum pollution. Accordingly, the Agency brought claims for cost recovery and injunctive relief under the Polanco Act, contribution, indemnity, and declaratory relief under the California Hazardous Substance Account Act (HSAA) (State superfund statute), and common law claims for nuisance, trespass, equitable indemnity, and declaratory relief.
Present Situation
The Agency accepted Caltrans’ offer to enter into settlement discussions in early April of this year. After multiple discussions, the parties tentatively agreed upon a settlement figure of $800,000. The Successor Agency board approved this settlement in closed session on September 22, 2015.
FINANCIAL SUMMARY
The settlement proceeds, net of contingency attorneys’ fees and litigation expenses in amount not to exceed $270,000, shall be included on the Recognized Obligation Payment Schedule and distributed by the Successor Agency pursuant to Health and Safety Code section 34177.