Three-year legal battle between Seaside, Sand City nears closure.

You can’t get to Sand City without going through Seaside. That fact is at the heart of protracted, high-stakes litigation between the two cities that may finally be coming to a close.

A lawsuit filed by Seaside in December 2012 centers around a 1989 tax-sharing agreement between Seaside, Sand City and the former redevelopment agency of Sand City. The agreement was borne out of projected traffic and roadway impacts relating to Sand City’s shopping centers. It stipulated that the former redevelopment agency of Sand City pay Seaside a small portion of the shopping centers’ sales tax revenue annually to offset Seaside’s expenses on road improvements and maintenance.

Those payments stopped in 2012 with the dissolution of the state’s redevelopment agencies, which spurred the lawsuit. And because a penalty clause in the agreement stated Sand City and its former agency pay Seaside $10 million dollars – minus what they’d already paid, plus inflation – in the event those payments stopped, Seaside sued for $6.8 million.

After rulings made earlier this year by two judges in Santa Clara County Superior Court, where the case was heard, the penalty clause was deemed unconstitutional.

Over the past months, both sides have moved to settle. Jim Heisinger, Sand City’s city attorney, writes in an email that the Successor Agency to the Sand City Redevelopment Agency will seek state approval to allocate property tax revenue to Seaside roughly in the same amount as prior sales tax payments.

The settlement heads to court for approval Dec. 17.