RICHMOND — A legal settlement will cost Richmond $700,000 at a time when the city can ill afford another big expense.
In a special meeting Tuesday, the Richmond City Commission agreed to settle a breach-of-contract suit filed last year by developers of a proposed recreational vehicle park.
The developers sued after the city commission terminated a lease that would have allowed the development of Lakeview RV Park on Camp Catalpa Park, a 15-acre tract owned by the city that borders Lake Reba, a recreational complex.
Under terms of the settlement, payments will be staggered. On Tuesday, Richmond was to pay $450,000, and its insurer, Kentucky League of Cities Insurance Services Inc., would pay $50,000. The $200,000 balance is due on or before July 11.
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Mayor Connie Lawson, who lost her bid for re-election on Nov. 2, said she and others thought the settlement was in the city's best interest.
"We realized that the court costs were going to be huge," Lawson said. "There is no doubt that it was a breach of contract. ... So we feel like we have cut our losses tremendously. I think that the settlement is probably better than how we would have fared in court."
In recent months, the city has had difficulties with its $25 million budget. An audit released in May by the state auditor's office showed the city had a deficit of more than $3 million for the fiscal year ending June 30, 2009.
The city has taken measures to increase revenue and reduce or limit expenses, but City Commissioner Robert Blythe acknowledged after Tuesday's meeting that $700,000 "certainly could have been used for something else" in terms of city services or infrastructure.
Lawson said the settlement won't put the city in a bind. She said tax money is coming into the city coffers, and the city will get $440,000 when it closes on the sale of land that Asahi Forge will use for an expansion.
"This year's budget will not be affected as much as we originally thought it might," Lawson said.
The mayor said it's possible that the insurer might pay more than $50,000. But the insurer won't pay the entire settlement, she said, because breach of contract is "the unpardonable sin. It's the worst legal sin you can have."
The settlement was approved on a 4-1 vote. Lawson, Blythe and commissioners Rita Smart and Mike Brewer voted yes, while Commissioner Bill Strong voted no. Strong said he voted against it because he was willing to take his chances in court.
"My belief was, we could have gotten a little better settlement going through court," Strong said.
The settlement removes a cloud hanging over city hall since 2008.
When public opposition arose to the RV park, the city commission voted to rescind the 40-year lease in March 2008 — a little more than a month after Lawson had signed it — even though lawyers advised that the contract was legally binding.
In the suit filed in October 2009, Lakeview RV Park LLC said it was illegal for the city to rescind the lease. Lakeview also said the city commission had denied due process.
Had the city commission not approved the settlement, the case would have continued to trial. Lakeview claimed in the suit that its loss of investment, lost profits, attorney's fees and other damages "flowing from defendants' wrongful acts" was not less than $12 million.
The RV park would have included 120 campsites, a fishing pier, trails, an amphitheater for group activities and a general store. Opponents said the RV park would have destroyed an area that had been designated as a bird sanctuary.
Beverly Wickersham, who had opposed development of Camp Catalpa, said the settlement is "an expensive lesson the city had learned. They're put in charge of taking care of the public's property, and I don't think they did a good job of taking care of it."
On the other hand, Camp Catalpa benefited in that more people paid attention to it. The city has worked to remove honeysuckle and other undergrowth, Wickersham said.
There were rumors earlier in the year that a settlement was in the works but that nothing would be approved until after the Nov. 2 election. But, Lawson said, "There was no way we could have settled it before November anyhow" because city coffers would not have been replenished by fall tax collections.
"Our money doesn't come in until November, so we could not have settled it ahead of time because we didn't have the money," Lawson said. "I guess we could have borrowed the money, but I don't believe anybody would have voted to do that."
Lawson said she also wanted to settle the suit so it would be one less item to deal with for the administration of Mayor-elect Jim Barnes.
"And I believe in my heart it would have been much more expensive" had it not been settled now, Lawson said.
Barnes, who will be sworn in as mayor on Dec. 31, said he appreciated Lawson's thought.
"It's a bad situation, but I'm glad it's behind us," Barnes said.