City settles Keystone lawsuit, loses nearly $500 K
May 08, 2014 | 2056 views | 0 0 comments | 19 19 recommendations | email to a friend | print
A failure by previous county and city staff members over the course of a decade or longer caused the city of Patterson to finally settle an ongoing lawsuit this week.

The suit, originally to be settled for $2 million, was negotiated to $1.3 million, of which the city of Patterson will be on the hook for nearly $500,000.

Deputy City Attorney Doug White said the city settled the suit with the Keystone Corporation for mistakes originally made by county staff members as to the annexation of land.

The land the Keystone Business Park sits on, 505 Baldwin Rd., was annexed into the city of Patterson from Stanislaus County.

White further explained that the staff members’ errors were never checked over by Patterson’s city staff while they were under the guidance of at least two previous city managers, not including current City Manager Rod Butler.

The money was supposed to be collected by Keystone through the city to help pay for an environmental impact report to develop the land that is now the Keystone Pacific Business Park.

Keystone put up several million dollars for the environmental document that was generated when the land was still in Stanislaus County’s jurisdiction.

When the land was annexed in 2006, a development agreement called for fees to be collected by the city and paid back to Keystone Corporation for the environmental study.

The park was developed with such tenants as the Kohl’s and CVS Distribution Centers. However, those fees were never collected, White said.

“We estimate we will not collect $400,000 to $500,000,” White said Tuesday, April 29.

The exact figure could not be made available because other buildings in the park have yet to be developed and the type of fees charged for that construction will vary depending on the size of buildings and lots on which they are developed.

The city will be paying $312,000 for each of the next three fiscal years, minus $62,000 a year that Keystone owes the city for its portion of the 2010 City General Plan update for a total of $250,000 per fiscal year.

The city of Patterson originally filed a $175,000 lawsuit against Keystone Corp., the owner of Keystone Pacific Business Park in western Patterson, for money that city officials said was owed in 2012 for work on the city’s general plan two years prior.

The suit was filed in June, 2012 in Stanislaus County Superior Court.

According to court documents, North Carolina-based Keystone initially promised in June 2007 to make a $350,000 contribution toward the city’s general plan.

The company made a payment of $175,000 in December 2007 but failed to make a second payment of the same amount due in June 2008, according to court documents.

After filing the suit, the city requested a motion to “stay” — or put a hold on — the proceedings.

“We’re requesting it to be stayed in order to have a longer conversation,” White said in 2012. “I fully expect this will be handled outside of court.”

Keystone’s lawyer, George Petrulakis of Modesto, said the case amounted to simple math and could be resolved along with a separate issue — developer fees, Keystone said, is still to be owed by the city.

“Keystone feels it’s owed monies from development of the West Patterson Business Park,” he said, explaining that the corporation paid for more than its share of the business park’s infrastructure.

Keystone Pacific Business Park, which is 350 acres, is part of the 1,100-acre West Patterson Business Park.

Keystone Corp. paid for infrastructure improvements for the whole park when it was being developed.

As other businesses moved in, developers paid the city for the earlier work — some of which Keystone was owed as reimbursement.

Contact the Patterson Irrigator at 892-6187 or
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