PORTLAND — What one hand gives, the other takes away.
That was the tough lesson learned Monday by the City Council, which approved the sale of seven city-owned parcels in Bayside for $2.3 million, but had to shell out nearly $1 million for waterfront land seized by eminent domain.
The $967,000 settlement is the penultimate verdict in a nearly six-year legal battle between the city and the Portland Co.
The legal wrangling will continue, since the city plans to challenge more than $200,000 in interest included in the award this month by a Cumberland County Superior Court jury.
According to a legal memo to the council, the city bought a triangular parcel north of Hancock, Hanover and Fore streets from the Canadian National Railroad in 1993.
That parcel, however, was encumbered by an 1865 rail easement held by the Portland Co.
The city tried to reach an agreement to dissolve the easement, the location of which was not specific. But the two sides were far apart: the city believed the easement was worth $5,000, but the Portland Co. said it was worth $2 million.
Attorney Debbie Mann, who litigated the case for the city, said the case was bogged down in the courts because of several motions filed by Portland Co., some of which she called “creative.”
Mann said the city won those arguments, which saved up to $1.5 million. The jury ultimately settled on a value $795,000, less than half of what the Portland Co. sought.
The jury also awarded Portland Co. more than $240,000 in prejudgement interest, which was calculated from when the lawsuit was filed on July 6, 2005.
The city, however, believes the interest payment should be calculated from when the Supreme Judicial Court ruled on Sept. 13, 2009, that the land seizure was legal, clearing the way for the debate over the easement’s value.
The court battle has resulted in significant legal costs on both sides: $180,000 for the city and $250,000 for the Portland Co.
Phineas Sprague, owner of Portland Co., on Tuesday said he was disappointed that the case continues to drag on. He said the wrangling has discouraged developers from proposing projects along the eastern waterfront.
“Let’s get this behind us,” he said. “This whole thing is awful. This is not a victory; it’s a disaster.”
Sprague claimed the city’s aggressiveness in the case has resulted in developers pulling plans for projects that would help the area implement the vision outlined in the Eastern Waterfront Master Plan.
The stymied development has resulted in lost tax revenues much greater than the settlement, he said.
“No one in their right mind is going to make an investment if they’re competing with the government,” he said.
Councilor Cheryl Leeman on Monday questioned whether the legal battle was worth it. But Mann said it was necessary to clear the title on the land.
Mann used the analogy of a champagne bottle to illustrate the importance of the case, equating the easement to a cork in a vintage bottle owned by the city.
“You can’t enjoy the champagne until you have ownership of the cork,” she said.
The council also voted unanimously to sell seven city-owned lots along Somerset Street in Bayside for $2.3 million.
The city is selling about 3.25 acres of land to Miami-based Federated Cos., which will now work with city staff and neighborhood residents to draft a mixed-used development that will include market-rate housing, offices and retail businesses.
Leeman noted that there are specific benchmarks that will allow the city to buy back the land if Federated, which also owns the Bayside Village Apartments, fails to move forward with the project.
Councilors ignored a request by Bateman Partners representative Chris O’Neil to conduct a public review of a competing proposal from Bateman, which was working with the University of New England to build a new graduate school of dentistry, community clinical services, administrative offices and student housing in Bayside.
O’Neil cautioned the city about being prejudiced against a nonprofit use of the property, since some councilors noted that having a taxable use played a key role in their decision.
Councilor John Anton said he is not against nonprofit groups in Portland and that he would still like to see the dental clinic established in Bayside.
“There is nothing in the purchase and sale with Federated that would rule that out,” he said.
Anton said he looked forward to the development of the land, which has been on the market for about six years.
“It’s been a long road,” he said. “It’s pretty exciting to sort of turn the corner on these properties.”
In other business, the council agreed to a three-year employment contract with Mark Rees, who will be the new city manager.
It’s the first time the city has had an employment contract with its manager.
Rees will receive a $143,000 annual salary, a $450 monthly vehicle stipend, three weeks of vacation a year and up to $10,000 for moving costs. The contract requires Rees to become a permanent resident of Portland within 15 months.
Former City Manager Joe Gray, who was with the city 40 years, including 10 years as city manger, earned a salary of $121,000 when he resigned in February.
Rees, who is currently the city manager of North Andover, Mass., left Monday’s meeting after the council approved his contract to prepare for an annual Town Meeting and to ask the North Andover Town Council to waive his 90-day notice, so he can start before Sept. 1.
Rees was selected over 65 other applicants, including Acting City Manager Pat Finnegan, who was one of three finalists.
“I assure you,” he told the City Council, “you will not be disappointed.”