Merced wins round in battle over Highland Park development

This is the story of what happens when the economy implodes, developers go bankrupt and cities are left with half-complete subdivisions and incomplete infrastructure promised them by developers.

When Pacific Pride, a residential developer, came to Merced in early 2006 and got the OK to build a subdivision called Highland Park, it was just one of many flocking here during the building boom.

Then came the fall.

Like many developers in and around Merced, Pacific Pride's subsidiary declared bankruptcy. Soon the builder on the project left too, since no one was paying the bills anymore. What was left was a dangerous work site and a subdivision with roads and little else.

That's not all. Incomplete infrastructure that had been promised to the city was also left unfinished, although the improvements had been promised to the city in the original development agreement.

Now, for the first time, some of the city's promised improvements have been completed, even if there are no houses built around them, said David Gonzalves, the city's development services director.

In late February, a bike path, a sound wall and a series of other improvements were finished in the Highland Park development, behind the Lowe's shopping center.

It took almost 15 months, said Gonzalves, but Insurance Company of the West, the bonding company for the city in this case, finally agreed it was responsible for about $400,000 in improvements and upkeep on the site.

"It's been very difficult and a long process," said Gonzalves. "It's a battle."

The only recourse the city has when developers go out of business and fail to fulfill their promises is to call in the bonds, which the developers are required to put in place before they build. The bond company is meant to pitch in and complete the infrastructure improvements when the original developer has gone under, said Gonzalves.

"When times are good this doesn't happen -- that's why we have bonds," said Gonzalves.

It's just one of three such projects that have finally gotten paid for among some nine incomplete subdivisions in the city, said Gonzalves. The city just received more than $5 million in bonds for improvements at the Bellevue Ranch development, for example. The city also got more than $1 million for an unfinished bike path at the same development.

The city wasn't the only entity the Highland Park project has burned.

The contractor that was working on the project, Ross F. Carroll, Inc., was never paid $600,000 it was owed by the developer. Eventually, the company had to leave the site since there was no money, said Sean Carroll, president of Ross F. Carroll. "I left the project for lack of payment," Carroll told the Merced City Council.

That wasn't the end of the construction company's woes.

In early December, a sidewalk improvement contract for the city wasn't awarded to the company -- the lowest bidder -- since city representatives said it had failed to fulfill its obligation as the general contractor on Highland Park. The city didn't want to deal with the same contractor that had left the last project in what the city considered unsatisfactory condition. Carroll claimed the site was left in a safe and responsible manner.

That was just one of the many parts of the puzzle that became Highland Park.

Ross F. Carroll has also sued both the city and the bonding company for its loss of $600,000. The case is still in court.

Reporter Jonah Owen Lamb can be reached at (209) 385-2484 or jlamb@mercedsun-star.com.