I would sell to the city. Here’s why:
filling lots is time and capital intensive.
litigation is also.
the entire period that the park is in litigation it will be illiquid to sell or finance.
you just bought it and so you’d be taking a quick profit you can roll into another park
I’m confident you will prevail in court on the grandfathering argument (consult the recent Mississippi Supreme Court case) but that could take $50,000 and years to pursue worst case.
This reminds me of a park I had near Ft. Worth, Texas. Same thing happened. I went to my lawyer and he told me to sell it to the city. Even though he said I would win in court. Even though it was worth much more to keep it. But because it was the right business decision based on the risk. That’s what I did and I never regretted it.
We fight and beat cities all the time on grandfathering. But in those cases we have large existing occupancy and no option to sell for a fast profit.
Just some thoughts.