Boiler Bay Beacon
DEPOE BAY — The city has settled a lawsuit alleging bias in its planning department and city council, agreeing to pay $2,390,000 to a hard-working immigrant whose American Dream was nearly shattered on the rocky cliffs of Depoe Bay.
The resolution to Castaneda v. Depoe Bay in federal court came at a bitter cost to the city, which had to cover nearly $900,000 in settlement costs its insurance company refused to pay. In addition, the sitting mayor resigned over the arrangement in a terse letter that suggested more legal and political chaos may be on the horizon.
In their lawsuit, Manuel and Rosa Castaneda recalled how they purchased their Depoe Bay property in 2004 to build a family “dream home.” But when they moved forward with a green light from the city planner in 2023, two city councilors allegedly intervened to derail the application.
The July 8 agreement came six months after U.S. District Judge Michael J. McShane issued a scalding rebuke of Depoe Bay’s bid for summary judgement, where he summarized key facets of the city’s case as “bizarre” and “baseless.” In allowing the complaint to move to trial, McShane called the city’s denial of the Castaneda building permit “…arbitrary, irrational and taken with improper purpose.”
The settlement, however, required no admissions of fault, wrongdoing or liability from Depoe Bay, which denied all charges, including claims of racial discrimination. In a Pyrrhic victory, the city ended up with the oceanfront lot that served as the acrimonious battleground.
“We didn’t want the property anymore because the city poisoned the neighbors against us,” stated Manuel Castaneda, a naturalized U.S. citizen who grew his landscaping business into a multi-million-dollar company, PLI Systems, that saves homes, businesses and public works such as the Depoe Bay seawall from the Northwest’s shifting terrain.
“So when we would come and visit just to maintain it the neighbors would walk by and didn’t talk to us,” he reflected. “We depend on our neighbors to call for help, to pull packages into their homes, to watch over things when we’re gone. That’s not gonna’ happen here.”
The city took ownership of the cliffside lot at 130 NW Sunset Street with a separate check that caused Mayor Valerie Sovern to tender her resignation, brusquely writing:
“Effective today July 1, 2026 at noon I am submitting my resignation as mayor of Depoe Bay. I am not comfortable signing a check for $890,000 made out to an LLC in a lawsuit and not to a legal escrow account. I was given no backup invoices. Just a check request. And directive to sign. There are other reasons that I cannot legally discuss that have pushed me to this difficult decision. Best of luck, Valerie Sovern.”
Castaneda said the purchase price was tenfold what he paid for the lot.
“The biggest irony is when I saw they were committed to blocking us, I sent an email to the city offering to sell the lot at market rate and take the money and build someplace where we don’t have this kind of opposition,” he remembered. “We offered an off-ramp, but they sent a reply saying they were not interested in buying anything,”
The city’s insurance company, CSI, paid $1.5 million, while the city forfeited its share of the settlement, $890,000, from about $16 million in cash that is on hand in various accounts, including a Local Govt. Investment Pool. The final settlement amount does not represent the full cost to the city, however, including several years of legal fees ranging to $25,000 per month to the Portland law firm Davis Wright Tremaine, LLP.
“I had a lot of friends telling me, ‘Manuel, this is normal, you’re never gonna’ win against the city, just walk away, move on with your life and find some other project,’” concluded Castaneda, who counted more than $1 million in legal fees to force the city’s hand. “But how could we walk away, knowing in our minds that for 20 years we made payments on a property we bought for our dream home, and then they stole it from us and we didn’t fight to keep it?”
City Council President Joe Cannon is in line to become the next mayor after a unanimous council vote June 7. He will be sworn in at the June 21 meeting, said Kimberly Wollenburg, city administrator-recorder.
I would resign too, out of embarrassment, if I mismanaged city finances to this extent. Enjoy your racism, folks. You sure paid enough for it.
I did not need to be poisoned by city council members against Mr. Castaneda. His ridiculous house and destructive building plan was poison solely on it’s own merit.
Incidentally, I never saw you ‘walking the neighborhood’, as you said. It is odd (especially considering your intentions), that you never once knocked on our door. I wonder, why was that?
Nonetheless, congratulations. You turned an unbuildable lot into your own personal pot of gold, albeit at the cost of turmoil and community ill will.
Now that the city owns the lot, I hope something good can be done with it, such as a scenic wayside and continuation of Noth Point Park for all the people who actually DO walk Sunset Street.