Santa Monica property dispute heads for final showdown before county court judge.

The decade-old controversy over development of a prime parcel of Santa Monica State Beach property on the Pacific Coast Highway in Santa Monica may now to be heading to court.

Once the site of the private and exclusive Sand and Sea Club, the beach property has become a development football, with developers arguing for private access and others saying the site should be reserved for public use.

Now, the operator of a trendy Santa Monica eatery is seeking to overturn the results of a November 1990 public referendum that prohibited him from building a combination hotel, restaurant and community center on the property.

The challenge, being brought in a lawsuit, also tests public versus private access and development, and whether local voters can determine the use of state-owned property.

However, there is some question whether the suit will ever be heard because even though it was filed with the Los Angeles County Superior Court on Dec. 19, the defendant in the case -- the City of Santa Monica -- had not been officially served with it a month later.

The attorney for restaurateur Michael McCarty said the suit will be served and the delay is not part of some secret legal strategy. "It will be served in due course," said Howard Miller, an attorney with Pircher, Nichols & Meeks in Century City.

McCarty, who owns Michael's restaurant on Third Street in Santa Monica as well as restaurants in New York and Washington, claimed the public initiatives that banned the development are invalid because they exceeded the city's authority to rule and regulate the use of the property.

City attorney Robert Myers said McCarty had agreed to the referendum and stipulated that the proposed development of the property depended on the outcome of the vote.

"He agreed in the contract to the initiatives and said that he would leave the issue up to the voters," said Myers. "He agreed to abide by the vote and lost, and now he is trying to renege on the agreement."

For years, the beach had been the site of the private beach club but in the early 1980s, the state ordered the Santa Monica City Council to open the property to public use.

That began a decade-long struggle over what to do with the land. The city's first proposal to the state, which would have provided a modified version of the private club, was rejected by California officials because it did not provide enough public access, according to the McCarty lawsuit.

In 1986, the state again mandated that the city seek new proposals for the property and said any new use of the land must produce at least $500,000 in lease revenues for the community.

Ultimately, the city advertised for bids for the project, with the stipulation that private development include some public facility, like a community center, and that a portion of the revenues from any businesses built on the site be shared with Santa Monica.

In 1988, Pacific Beach State Partnership, a group led by McCarty, won the right to negotiate with the city for development of the property. After what McCarty describes in the suit as a "lengthy and expensive" process, the partnership and the city signed a development agreement for the property that included construction of a low-rise 110-room hotel, a restaurant, a health spa, conference facilities, a community center that would be part of a public beach, a beach cafe and an art and environmental center.

The total development cost of the project would have been between $20 million and $30 million, said Miller.

According to the lawsuit, the agreement included provisions that the partnership pay for all capital and operating costs of the community center and that $1 million a year in rental revenues from the project would be used to maintain the beach. The partnership estimated that the hotel would generate about $1.3 million a year in bed tax revenue for the city.

In August 1990, after months of negotiations and three nights of public hearings, the Santa Monica City Council approved the project.

However, because of strong community opposition to the project, the city council decided to put the issue to a public vote. And according to city attorney Myers, McCarty agreed to the vote and signed a development contract that said the outcome of the referendum would determine whether the project would move forward as planned.

Through two initiatives, voters in Santa Monica in November 1990 rejected the partnership's proposal and created a "beach overlay district" that prohibits construction of any hotels, restaurants or food service facilities of more than 200 square feet or one story in height.

Voters rejected the partnership's proposal and instituted the restrictions on beach construction by roughly a 60-to-40-percent margin.

Miller did not dispute the city's contention that McCarty had agreed to abide by the results of the referendum but said the larger issue, and the one that supersedes any local agreement, is community control of state-owned property.

"The voters of Santa Monica do not have the power to dictate the use of state property. The 86,000 voters of Santa Monica cannot bar the other 30 million citizens of California from appropriate uses of the state-owned beach," said Miller.

In the lawsuit, McCarty says the city and the partnership "mistakenly believed the city electorate had the legal and legislative power to repeal the development agreement . . . As a matter of fact and law, the city electorate did not have any power to repeal the development agreement."

McCarty is asking the court to overturn the results of the referendum and declare the development agreement valid and enforceable.

Currently the city is operating the property, located at 415 Pacific Coast Highway, and is collecting revenues from the beach facilities that include a restaurant.