City may be sued to block development of the 31st Street hotel project

In a lengthy letter from an unidentified group of 'Virginia Beach business owners and individuals,' lawyer Kevin Martingayle has taken the city to task over several legal irregularities he claims are in violation of state law and the Constitution involving the controversial deal to build a hotel on city property at 31st Street in partnership with two convicts.

31st Street legal costs

To date the city has spent in excess of $585,800 to pay outside - non-city employed legal staff - for services involving the 31st Street hotel project.

The city attorney has a legal staff of more than 20 lawyers.  City legal and staff time conservatively can exceed $2M in dealing with legal issues involving the 31st Street Hotel project since 1997.

A suit challenging the legality of the council's controversial actions could cost the city $500,000 to $1million more in fighting the case to the U.S. Supreme Court.

The project could be delayed for years to come.

The following is a summary

FY 97/98 $27,535.00
FY 98/99 $191,925.00
FY 99/00 $74,656.25
FY 01/02 (YTD) $256,583.05
Total  $585,843.05

Martingayle said what the city did was nothing short of 'land-laundering.'  "Laundering, in the legal sense may be defined as 'making something improper or offensive seem less so by engaging in a process or exchange designed to conceal something or escape legal duties or restrictions.'  That description certainly seems to fit in this case," Martingayle wrote.

City Atty. didn't read 'impending suit' in letter

City Atty. Leslie L. Lilley said he considered Kevin Martingayle's letter 'an advocacy/political letter.'  He did not interpret it as a threatened suit if council proceeded to approve the 31st Street Hotel contract @ its May 16 meeting.

And because the letter indicated that Martingayle had sent copies to all interested parties, Lilley didn't feel he needed to distribute the letter or discuss it if members of council didn't raise the issue in closed, briefing or public session.

Martingayle has proof that City Clerk Ruth Smith received the letter via fax in a timely fashion.  His fax transmittal sheet shows the letter was sent Ms. Smith @ 4 p.m. and received @ 4:03.

At least 3 members of council said two days after the meeting they had not seen it and did not know about it before the May 16 vote.  Some indicated it might have changed the outcome of the vote had it been properly circulated.

City Clerk Ruth Hodges Friday said Friday, "I never circulated the letter to City Council for a very good reason:  It was never sent to my office.  My name and title appears no where on the distribution list."

In addition, she said, all information received for the Tuesday council sessions go out @ 4 p.m.  "If it was received at that, it likely did not go out."

She said she will try to determine circumstances surrounding the time delay issue.

Since 1999 the city and its partners, convicts Edmund C. Ruffin and Bruce Thompson have been working on a proposal to build a 4-star hotel on city property at 31st Street and oceanfront under a contract that has shifted as much during the period as the sands on the beach.

Martingayle dances around whether a suit is imminent, but even one of the hotel's proposed developers, Bruce Thompson, said in an exchange of correspondence with city officials earlier that he fully anticipated a legal challenge to the deal before the hotel is built.

Martingayle, who has been on vacation, could not be reached for comment Tuesday night.  

His letter, however, was faxed to City Attorney Leslie L. Lilley Friday evening, May 10, with copies to members of City Council.  The letter, implying a suit if the city approved the project, apparently was not received, at least by some council members before their meeting on Tuesday, May 14, the day they gave final approval to the controversial deal in a 6-4 vote.

At least three (3) members of council as late as Thursday May 16 said they had not seen or been made aware of the existence of the letter and its implied consequences.  Councilwoman Reba McClanan said, "I did not see it and I had not heard about it (until called by VNS).  It could have been in my package (materials members receive from the city clerk), but if it had been, I think I would have noticed it."

City Attorney Lilley on Friday, May 17, said he did not distribute the letter or raise its existence for discussion before the final council action on May 14 "because the letter noted that copies were  sent to all members of council, members-elect, and City Manager James K. Spore."  Lilley said he did not know of any discussion involving the letter prior to the council vote that day, but assumed all members had received a copy of it.

There was some speculation by members that had the letter been available to all members prior to the vote, the final vote might have lost on a 5-5 tie - leaving the newest contract deal without approval.

Martingayle alleges irregularities under the Virginia Public Procurement Act, previous court rulings and cases he claims are applicable, and prohibition against 'excessively' long leases by the Constitution, and the use of the Virginia Economic Development Authority serving as the 'straw man' - the front agency to do legally what the city council could not do.

Lilley, however, argues differently claiming the original contract, signed in 1999, remained active and ongoing in which deal killing deadlines were 'mutually' suspended (to accommodate considerable changes) by agreement "of the parties.  There is no provision in the contract which would permit a party to void its obligations because it had changed its opinion of the project."

Martingayle charges the original contract is voided by the many missed deadlines and is now illegal because the terms and conditions have changed so dramatically that under the law, the project must be re-bid to be legal.

Lilley claims the council used the development authority legally to do what the council isn't allowed, by law, to do.

And that because all of the land subject to sale or lease in the deal is owned by the VBDA, the law and Constitutional prohibitions cited by Martingayle, do not apply to it.  (It would apply, it  is acknowledged, if the city were to do what the authority has done).  Nor does the Virginia Public Procurement Act, requiring equity and fairness, apply to the sale or lease of real property.

It is in adjudicating the disputed items wherein the court case will be brought and argued.