The tiny Los Nietos School District and industrial giant Armco Inc. have settled a long-running lease dispute over a plot of prime industrial land, which has been owned by the district since the days of Spanish ranchos a century ago.
Armco, a conglomerate of steel- and oil-related businesses, has used the 2 1/2-acre site to manufacture oil-drilling equipment since the early 1960s without paying a dime of rent because it inherited a lease on the property that had been paid by an earlier tenant.
$4,000 Monthly Lease
A tentative agreement between the district and the Ohio-based corporation to lease the land for $4,000 a month--with an option to buy it for $1.1 million--was reached Wednesday. The pact also calls for Armco to pay the district $125,000 in legal fees and back rent for the choice acreage at 9100 Norwalk Blvd., on the northern edge of Santa Fe Springs.
The settlement--which comes only weeks before the dispute was to go to trial in federal court--will be an economic boon to the 1,700-student elementary district.
"We've been struggling over this for a long time, and we are very pleased it's over," school district Associate Supt. Lowell Shira said. "The district finally will be compensated fairly."
School board members will decide in coming months how the lease money will be spent. One option is for maintenance of the four campuses in the predominantly Latino district.
At Armco's national headquarters in Middletown, Ohio, corporate spokesman Don Easterly said: "We are relieved that the matter has been settled to the satisfaction of both sides."
The district hasn't used the property since 1926, when it closed a one-room schoolhouse there and opened a larger school nearby. The site--originally purchased by the district along with a one-room building for $10 in gold coins in 1865--was used by local businesses before being left vacant.
In 1949, the school board tried unsuccessfully to sell the property and ended up leasing it to Fluid Packed Pump Co., which was bought by Armco in 1960. Armco inherited the pump company's lease with the school district, an agreement that would have run through the year 2020 and required a one-time-only payment of $15,000. The pump company covered the lease payment when Armco bought their operation.
As a result, Armco hasn't had to pay the district anything for the site in more than two decades--an arrangement that prompted the district to file a lawsuit in federal court 18 months ago and triggered a David-versus-Goliath court fight.
Last April, U.S. District Judge Wallace A. Tashima in Los Angeles ruled the district's lease with the pump company--and later Armco--was invalid because it was drawn up improperly. The judge's decision turned control of the property back to the district and opened the door for school officials to negotiate another rental agreement with Armco.
'We've struggled over this for a long time and are pleased it's over.' Under the new agreement, Armco will lease the property for three years, with an option to renew the lease every five years through the year 2020. It also has the option to buy the property for $1.1 million.
Tashima must approve the agreement before it becomes final, said Shira of the school district.
Since taking over the lease from the pump company, Armco has placed several buildings on the property, which is valued at more than $1 million.
While the two sides have apparently settled their dispute, a mystery over how the 1950 school board entered the original lease with the pump company remains.
One problem is that tape recordings or transcriptions of the action do not exist, officials said.
A theory about the origin of the lease surfaced last spring during court hearings on its validity.
The school district's attorneys argued that at the time the pump company bid on the property in 1950, the school board announced the new lease would become effective only when the company's existing lease--signed sometime in the early 1940s--expired in 1978. That meant that any other bidders for the property would have been required to wait 28 years before moving onto the land.
In the end, only the pump company bid on the property.
Tashima said in his ruling that there were "enough irregularities" in the bidding process to void the lease between the district and Armco.