9 hours of mediation, and a brewery breakthrough

Thurston County's three largest cities and the owner of the former Olympia Brewery have reached a tentative settlement in the condemnation lawsuit involving the property's water rights.

The cities will pay an additional $750,000 under the terms of the settlement, bringing the total cost to acquire the water rights and more than 18 acres of land to $5.3 million. Each city will pay one-third of the total cost. They had paid $4,550,000 as their offer of just compensation, but the brewery owner, Well B Ng LLC, led by Barney Ng, said the assets were worth more.

The two sides reached the tentative agreement during a nine-hour mediation session Nov. 6.

"We were able to get pretty close in our bargaining with Mr. Ng," said Larry Smith, a Seattle attorney who has represented the cities in the case. "It came down to a number that both sides thought was pretty fair."

The cities also determined it was prudent to settle given it would cost an estimated $200,000 to go to trial, according to an Olympia city staff report. The 10-day trial, in which jurors would have set the value after hearing evidence, was scheduled to begin Jan. 26 in Thurston County Superior Court.

Ng has put the former brewery property up for sale, and the end of the nearly three-year-old lawsuit will allow him to put his energies into new projects, said Scott Smith, his attorney. "He didn't want to pick a fight with the cities," he said. "He just wanted to make sure he was paid fairly."

He declined to say how much Ng initially wanted the cities to pay for the water rights.

The settlement will be finalized once the cities approve it. The city councils in Olympia and Tumwater will vote on the proposed settlement Tuesday. The Lacey City Council will vote Thursday.

The city of Olympia sued to condemn the property in February 2006, when the land was owned by All American Bottled Water Corp.

The other two cities joined the suit later. The cities have agreed to split the available water equally to serve their growing communities.

The lawsuit was delayed when creditors forced All American into bankruptcy court in December 2006. Ng foreclosed on the property in March. His entities loaned All American the money to buy the property in 2004. All American eventually abandoned the property when its venture to bottle water there fell apart.

The cities took control of the water rights and land April 22, when they deposited their offer of just compensation. They purchased the land for a new wellfield because they intend to retire some low-producing wells on the site.

The volunteer Water Conservancy Board of Thurston County is considering the cities' requests to change the water use from industrial to municipal and the place of use from the former brewery property to the cities' service areas.

It will determine exactly how much water the cities own. On paper, the brewery property had rights to 7,420 acre feet of water each year, or 2.4 billion gallons, but they must be validated. The board's next meeting is Monday.

The state Department of Ecology must review and can approve, deny or amend the board's decisions.

The settlement amount will remain the same regardless of how much water the cities ultimately receive.