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The glory days of big-box stores might appear to be waning for Seaside, but the city is trying to cling to its share of sales tax revenues at the Edgewater and Sand Dollar shopping centers in Sand City.

In a lawsuit filed Tuesday in Monterey County Superior Court, Seaside is suing its neighbor to the west for breaching a 1989 contract.

That's when the cities agreed Sand City could construct the Peninsula's two major malls, understanding the traffic burden would be almost entirely on Seaside property; in exchange, Sand City agreed to give a portion of the sales tax to Seaside. They started with 5 percent in 1992, and ramped up to as much as 30 percent for different phases of the shopping center construction.

The catch: The 1989 agreement was between the two cities' redevelopment agencies, which ceased to exist after the California Supreme Court upheld AB X1 26 late last year. The Sand City Redevelopment Agency promptly rescinded the 1989 tax sharing ordinance two weeks after the Supreme Court ruling, even though Seaside officials argued the agreement should've stayed in place.

"One of our key points was that the plan was based on the life of redevelopment," Sand City city manager Steve Matarazzo says. "Redevelopment is now dead and the (tax-sharing) plan is dead." Seaside officials, including incoming mayor Ralph Rubio, declined to comment.

Sales tax remains Sand City's largest economic engine, generating about $1.8 million annually. About $400,000 a year goes to Seaside.


The suit seeks $6.8 million in damages, citing a clause in the 1989 agreement that guarantees a $10 million payout (minus what's already been paid incrementally) if one party backs out of its half of the agreement. The complaint points out traffic improvements Seaside has paid for, totaling over $1.7 million, to benefit the shopping centers.