A Wave of Relief After 1986 Flood

California taxpayers gave hundreds of thousands of dollars last month to Wayne Hall and his son, Dale, 19 years after a flood submerged their butcher shop in 6 feet of water. The settlement resolved a bitter legal battle so prolonged that nearly 500 victims of the disaster died waiting for similar payments.

The money -- “a nice check,” said Wayne, though he won’t disclose the figure -- settled the Halls’ damage claims from a 1986 levee break that destroyed thousands of dollars worth of meat and all but the shell of their shop near Marysville, north of Sacramento.

In all, California taxpayers will pay $464 million to nearly 3,000 people and their heirs, as well as businesses and their insurers, affected by the collapse of a section of earthen mound along the Yuba River. The total is more than the annual budget of the state Department of Parks and Recreation, the state Department of Fish and Game or the state Energy Commission.

Officials fear the court ruling that spurred the settlement will lead to giant payouts of tax dollars to flood victims in the future. The June ruling found the state liable for damages from the collapse of the 101-year-old levee.

“I think it is going to have long-lasting and rather severe financial effects on the state of California,” said Assemblyman Tom Harman (R-Huntington Beach).

Most of the settlement money is for interest accrued over nearly two decades while the state refused to settle. Shortly after the flood, overall damages in the relatively poor towns flooded were estimated at $100 million.

The state had a billion-dollar surplus at the time but argued in court that it was not liable for the damages. This year, the cash-strapped state borrowed most of the settlement money from Merrill Lynch & Co. The state has disbursed $36 million and is to pay back the rest with interest over the next decade.

Gov. Arnold Schwarzenegger’s staff said he has asked for legislation to blunt such liability in the future, concerned that it could siphon money from schools, roads and other government services. A bill is in the works, but it has run into resistance from landowners, developers and local agencies that maintain levees, as well as most Republican lawmakers, who opposed the property fees the proposed legislation once contained for levee improvements.

Even with regular investment in levee repairs, experts say some flooding is inevitable along the earthen fortifications that hold back rivers as they flow from the Sierra into the Sacramento and San Joaquin valleys. Experts joke that there are two kinds of levees: those that have broken and those that will break.

At the same time, potential damages are soaring as thousands of homes are built on former peach orchards and tomato fields south of Yuba City and Marysville, within commuting distance of Sacramento. The same periodic floods that once simply washed silt onto fields would now destroy carpets, furniture and cars.

“There’s development going on behind levees that we know are not good levees,” said Jeffrey F. Mount, a UC Davis geology professor and member of the state Reclamation Board, which attempts to control development in flood plains. “If these levees break, and they will eventually fail, and these people are flooded, the first thing people are going to say is, ‘You should have known.’ ”

A case in point is the 1986 damage claim, called Peter Paterno vs. State of California, which included two trials. In November 2003, an appellate court ruled that the flood victims suffered because of an unreasonable state plan.

The levee was scraped together by men and horses in 1904, improved by federal engineers in 1934 and incorporated into the state’s Sacramento Valley flood control plan in 1953. After the state took responsibility, it never tested the heart of the levee to see how strong it was.

Even though the levee withstood floods in 1955 and 1964, its core was made mostly of gravel that was not compressed, and it was located in a place prone to seepage.

“When a public entity operates a flood control system built by someone else, it accepts liability as if it had planned and built the system itself,” the appeals court justices wrote.

The state appealed that decision, but in the spring of 2004, the California Supreme Court declined to consider it. Settlement talks began in earnest for the first time, culminating in the recent agreement.

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The sun was shining Feb. 20, 1986, after nine days of heavy rain, and the Yuba River was starting to recede when a 150-foot section of the levee gave way. Water inundated 10 square miles of land in the communities of Linda and Olivehurst, including the Peach Tree Mall a few blocks from the modest home of Mariel and Pete Paterno.

Scrimping to put two children through college, the Paternos had dropped their flood insurance four months earlier. The flood ruined Mariel Paterno’s wedding gown, clippings from her children’s first haircuts and French provincial-style furniture.

A settlement, she said, would have cost a lot less in 1986.

“It’s burdened all the people in California,” said Paterno of the 19-year lag.

The state oversees roughly 1,600 miles of levees, all in the Central Valley. The berms protect more than half a million people, 200,000 structures and 2 million acres of farmland.

The state inspects the levees and evaluates maintenance by local authorities. According to the state Department of Water Resources, the backlog of repairs on the aging levees, many of which date to the mid-1800s, exceeds $2 billion.

In Southern California, where rivers are smaller and shorter, the state has no similar role. Local agencies take responsibility for flood control.

Lawmakers are worried by the Paterno decision but say there’s no easy, cheap way to reduce the state’s liability or prevent floods.

The Schwarzenegger administration this year boosted the state’s levee maintenance budget by $26 million, reversing cutbacks of the last several years. And the governor’s aides drafted a bill in February that would have created a Central Valley authority to assess fees on property owners to pay for better flood control.

Republicans -- with the exception of Harman, Shirley Horton of Chula Vista and Keith Richman of Northridge -- voted against the bill, AB 1665 by Assemblyman John Laird (D-Santa Cruz), even after the property fees were deleted. They said they feared the fees could be reintroduced.

Brian E. White, assistant legislative director for the state Department of Water Resources, said that while the bill is pending in the Senate, talks are continuing on amendments to define the levees for which the state is responsible, set repair priorities and require counties to notify property owners that they ought to buy flood insurance. Eventually, he said, the administration hopes to sponsor legislation that would impose flood control fees across the Central Valley.

“While the state is on the hook for potentially millions of dollars,” White said, “it’s not only a liability issue. It’s a public safety issue.”

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In Linda, the scruffy community where the levee collapsed nearly 20 years ago, the flood has left an indelible mark.

Today the Peach Tree Mall -- which once had a JCPenney, a Kmart and numerous specialty shops -- sits virtually empty, except for county welfare and health offices. The lights are dim, the floors are scuffed and the parking lot is weedy.

The former mall owners, tenants and their insurers are expected to get $36 million.

Some say the area might have recovered more quickly if the state had settled the claims right after the flood.

“The money would have been back in circulation, the people would have been back in, the economy would have been different out here,” said Dale Hall, the butcher.

Before the flood, Wayne Hall said, he could sell an entire case of barbecued chicken to local customers in a day. That changed after the flood, as people moved away or their budgets tightened after borrowing money to repair their homes.

To fix their devastated shop, including demolishing a concrete freezer floor to replace soaked insulation, the Halls borrowed money from family and the Small Business Administration. For 15 years, they paid roughly $1,800 a month on the debt, on top of a mortgage.

They shifted their business to specialty hams and sausages and started taking orders from many miles away. They called the check they just received after 19 years of waiting a “comfort.” But the money doesn’t dissolve bitterness toward the state.

“Because there was such a small amount of voters up here, it looked to me like [state attorneys] didn’t really care what happened up here,” Wayne Hall said. “If this had happened in Los Angeles, they would have settled it the week after.”

Dave Sterling, chief deputy to state Atty. Gen. Dan Lungren from 1991-98, said he understands the flood victims’ frustration. But the state’s lawyers believed that settling the case would have effectively been an admission of responsibility and would have opened the door to untold liability in places with old levees, Sterling said.

“The thinking was that if a court eventually decided it,” he said, “so be it.”