Harbor Board Defers Pelagic Lease Showdown to Closed Session After Tenant Alleges Misconduct

The San Mateo County Harbor District's February meeting featured a high-stakes dispute over a hospitality lease at Pillar Point Harbor — complete with allegations of government harassment, a cancer disclosure, and threats of legal action — before the board voted 4-1 to suspend eviction and take the matter behind closed doors. The board also approved its sixth consecutive clean audit, advanced major coastal erosion projects, and greenlighted community events at the harbor."

• Pelagic Restaurant Group lease dispute heads to closed session after tenant alleges harassment, ADA violations, and government misconduct; board suspends eviction on a 4-1 vote

• Sixth consecutive clean audit approved with $17.1M in revenues, $19.1M in cash, and no auditor recommendations

• Coastal erosion projects advance as the district prepares to pitch the Princeton Shoreline Project and WRDA 2024 funding to the One Shoreline board

• Dredging emerges as top coast-wide priority after GM's trip to Washington D.C. for the CMAC conference

• Mid-year budget shows strong fiscal position with revenue on track and working capital projected $1.1M above the adopted budget

The Pelagic Standoff: $129K in Back Rent, Cancer, and Accusations of Retaliation

The longest and most contentious item of the meeting pitted the harbor district against its own tenant, the Pelagic Restaurant Group, which operates three facilities at Pillar Point Harbor: the Pelagic Cantina, the Ketch Harbor Pub, and a fish market. What began as a lease default discussion escalated into a parade of legal allegations from Pelagic's associates and a divided board struggling to chart a path forward.

The basics: Pelagic's lease — which runs through 2028 — calls for $20,500 per month in rent. Staff reported the restaurant owes $129,580 in past due rent and is in default of both rent payments and hours-of-operation terms. The district had issued a notice of default, and Pelagic failed to cure it. According to the staff report, Pelagic paid its full rent amount through September 2025, at which point payments were halved, then dropped to zero from November 2025 onward.

General Manager James Pruett laid out the financial picture for the board and explained the existing terms. He also noted that Pelagic had printed a 4.99% harbor fee on its menus — described as going to the district for equipment, conservation, and safety — that would have totaled $287,859 between November 2023 and the end of 2025, but was never paid directly to the district. Westendorf responded that current checks no longer carry that language.

Pruett flatly denied the misconduct allegations raised during the meeting. "We did not selectively enforce parking, we did not target their employees, we did not intimidate them. All that stuff is false," he said. "We're doing what we're required to by law. We simply can't lower somebody's rent without consideration. That would be like giving taxpayer money away, and we're not doing that."

Pelagic CEO David Westendorf then delivered a lengthy and personal public comment, disclosing that he was diagnosed with a rare form of cancer in June of last year.

"In June of last year I was diagnosed with a rare form of cancer and given months to live. This one-liter-sized tumor was with me unknown but limiting my ability to live a normal work life," Westendorf told the board.

He alleged the harbor district had engaged in harassment, selective parking enforcement against Pelagic employees, bad-faith lease negotiations, and ADA violations related to his cancer diagnosis. He outlined four demands: lower rent from $20,500 to $14,500 per month, enforce parking rules, prohibit competing food trucks, and keep the area clean. He announced plans to file a complaint with the civil grand jury and appeal to the San Mateo County Board of Supervisors.

Seven Speakers, One Message

Six additional Pelagic associates followed with public comments, each raising specific legal claims:

• Jennifer Randall, a Pelagic investor and El Granada resident, alleged First Amendment retaliation under 42 USC 1983, claiming emails from harbor district representatives with subject lines like "lawsuit??" constituted intimidation given the power imbalance between a government landlord and a tenant.

• Ashley Kleckner, a restaurant consultant and Pelagic investor, alleged the harbor district violates Title 6 of San Mateo County zoning regulations regarding required off-street parking and cited 14th Amendment equal protection concerns over selective parking enforcement.

• Marika Holmgren, a coast-side resident and business owner who herself has stage four cancer, alleged ADA violations, citing the district's failure to engage in an interactive process or offer reasonable accommodation after Westendorf's cancer disclosure. She also referenced the district's 2021 ADA violations costing $3 million and a 2018 sexual harassment admission.

• Marc Parrish, a Pelagic investor of 25 years, alleged that Vice President Virginia Chang Kiraly offered to change her vote on the single-tenant concept in exchange for a meeting with the governor's office — characterizing this as a potential quid pro quo violation of California law.

Chang Kiraly soundly denied the allegation. She acknowledged taking a meeting with an individual connected to the governor's office, but said it had nothing to do with her vote on the single-tenant issue.

Westendorf closed the group's comments by reiterating the grand jury filing plans and calling on the San Mateo County Board of Supervisors to intervene and assume authority over the harbor district.

The Board Splits

The allegations of potential litigation triggered a legal pivot. Commissioner Kathryn Slater-Carter moved to take no action on the lease, suspend eviction proceedings, and schedule a special closed session under the threat-of-litigation exception.

"I wanted every option spelled out so that it didn't look like we were rubber stamping any perspective," Commissioner Slater-Carter said. On the rent reduction question, she added: "I am very concerned about renegotiating a lease in the middle of the term of the lease. My initial reaction, and I remain waiting to be convinced, is not to do that. It's a bad precedent."

Commissioner Tom Mattusch cast the lone dissenting vote, arguing the board should act rather than delay. "I'll vote against it because I'd like to, instead of kicking the can down the road, come up with an action plan to negotiate and try and help the district and the restaurant succeed," he said.

Mattusch was also the sharpest critic of Pelagic's parking complaints. *"Parking isn't a red herring. Parking is a dead herring. It stinks. To hang your hat on parking one out of 365 days, that's .210 of 1%," *he said.

Decisions: The motion passed 4-1 by roll call (For: President George Domurat, Vice President Chang Kiraly, Commissioner Slater-Carter, Commissioner William Zemke; Against: Commissioner Mattusch). Eviction proceedings are suspended. A special closed session is scheduled for March 4 at 3:00 p.m. Pacific.

What's next: The closed session will allow the board to receive legal advice on the litigation threat. Pelagic has announced plans to file a civil grand jury complaint and potentially a civil lawsuit. The dispute involves $129,580 in past due rent alongside serious allegations of ADA violations, selective enforcement, and government misconduct that the board will need to address — either through negotiation or in court.

Sixth Consecutive Clean Audit Caps a Strong Financial Year

Why it matters: The harbor district's finances are in their strongest position in years, with independent auditors finding nothing to flag for the sixth year running — a streak that reflects a district that has professionalized its fiscal operations.

**Jared Solmonsen** of the auditing firm Nigro and Nigro presented the FY 2024-25 results. "We issued an unmodified opinion on the annual financial statements. That is a clean opinion. We do not want any modifications to the opinion language," he told the board.

The numbers: total revenues reached $17.1 million (up $190,000), total operating expenses were $14.5 million (up $1.7 million), and the district's net position increased by $2.6 million. Cash and investments grew to $19.1 million. The district's investment portfolio earned 4.91% against a 4.5% benchmark.

GM Pruett praised the staff. "I just really want to highlight the fact this is the sixth year in a row that the staff has got a clean audit with no recommendations," he said, also noting the strong investment returns.

Commissioner Slater-Carter echoed the sentiment, crediting the board's decision to hire a professional investment manager. "We've had an upward trend in a positive direction over the years that I've been on this board in terms of financial management and transparency of our finances and actually hiring a professional investment manager to take advantage of the economic environment," she said.

Vice President Chang Kiraly congratulated the entire staff. "I think this report is excellent. I think it is a congratulations to staff on the improvement that has been made. Everybody from the newest hire to the longest-term hire," she said.

Decisions: Approved unanimously by voice vote (5-0). The board requested the investment advisor present at the next finance committee meeting on the portfolio outlook.

Coastal Erosion: District Prepares Major Pitch to One Shoreline Board

The basics: The Pillar Point breakwater, constructed in 1961 by the Army Corps of Engineers, has caused documented erosion rates of 15–17 inches per year along the Princeton shoreline. The Princeton Shoreline Project, authorized under CAP Section 111, aims to address the damage caused by the federal structure.

Where things stand: GM Pruett walked the board through a comprehensive 59-slide presentation being prepared for the One Shoreline board. The Army Corps feasibility study has begun, with a cost-share agreement signed in February 2025 and a public scoping meeting announced for the following evening. The federal cost cap is $15 million, with the district responsible for approximately $1 million in cost-share.

The presentation also covered the completed West Trail Living Shoreline Project ($4.5 million), the Surfers Beach Replenishment Pilot Project ($8.1 million, 96,000 cubic yards dredged), and the WRDA 2024 flood and storm damage study. Pruett confirmed that continued sand placement on Surfers Beach is part of the WRDA 2024 project.

What's next: GM Pruett is authorized to present the deck — with board feedback incorporated — at the One Shoreline board's March meeting. The district is seeking partnership on the Princeton Shoreline and WRDA 2024 projects, emphasizing the federal government's responsibility for the breakwater-driven erosion.

Dredging Dominates the Coast-Wide Conversation

GM Pruett returned from the CMAC conference in Washington D.C. with a clear message: dredging is the coast's number one infrastructure need.

"We attended the CMAC, the California Maritime Affairs Committee in Washington D.C., met with several members of Congress and staff seeking funding for the Army Corps for our WRDA 2024 project and for the Princeton project," he reported.

Commissioner Slater-Carter underscored the urgency. "I think that the overwhelming top priority from what I heard in the Army Corps meeting was dredging. I mean, this is up and down our coast," she said.

The board discussed the Santa Cruz model, where the harbor district operates its own dredge with federal financing and dredges six times per year — compared to Half Moon Bay's once-every-six-years cycle. A public email commenter also urged regular sand nourishment at Surfers Beach.

Minor Items

• Consent calendar (items 1–10) approved unanimously by voice vote; individual item titles were not specified in the meeting.

• Commercial activity permit for Wendy Fagoni approved unanimously to conduct nonprofit forest therapy events at the Mavericks Trail. Vice President Chang Kiraly raised parking concerns given limited spaces at Mavericks Beach; Fagoni said events would draw 10–20 participants.

• Hounds in the Harbor dog show approved unanimously with a $753 fee waiver for the El Granada PTO fundraiser at Pillar Point Harbor on May 16, 2026. Commissioner Mattusch flagged potential parking conflicts with salmon season. Haley Peterson of the El Granada PTO explained the fundraising model: $30 per dog registration, vendor booths, and Pelagic kicking back 15% of food sales. Staff confirmed truck and trailer spaces would remain unaffected.

• Mid-year budget review received as informational: operating revenue at 52% of budget through December 2025, operating expenditures at 37%, and working capital projected $1.1 million above the adopted budget. Finance staff Rochelle presented the figures.

• Oyster Point Marina docks 1–6 expected complete by end of March. The spit has sunk approximately three feet since the harbor master's office was built and floods regularly; South San Francisco is responsible for remediation under the existing agreement. The board discussed hosting a future meeting at South San Francisco's city council chambers, targeting June.

• Committee assignments for 2025 retained unchanged pending the president's review.

• Staff life insurance benefit change deferred from the finance committee to the next regular meeting, as it cannot be considered at a special meeting.

• A public commenter requested commissioners use their microphones during meetings, noting difficulty hearing discussions due to side conversations and poor audio.