City Refuses OK on Bond Issue Until SDG&E; Settles Suit

The San Diego City Council on Monday held up a $150.6-million issue of industrial development bonds for San Diego Gas and Electric until the utility settles a suit it filed against the city 11 years ago.

At Mayor Roger Hedgecock’s urging, council members by a 9-0 vote delayed for two weeks what had appeared to be a routine bond issue. They pegged the issuance of the bonds to satisfactory resolution of a 1974 inverse condemnation lawsuit brought against the city by SDG&E.;

At stake is $5 million the city set aside for damages it might have had to pay to SDG&E.; City officials, who claim the utility has been dragging its heels in negotiations, would like to settle and free up the money for other projects--for beefing up the police department, for instance.

Also at risk, however, if the council fails to issue the bonds soon, are rates for SDG&E;’s customers. Customers will benefit if SDG&E; gets an infusion of capital from the tax-exempt bonds, but higher utility bills will result if the company is forced to raise money for expansion through taxable first mortgage bonds.

In urging a two-week delay for negotiations, Hedgecock acknowledged the risks.

“On the one hand, the company is justified in saying that there’s an opportunity to save millions of dollars (for customers),” the mayor said. “On the other hand, $5 million is locked up because we can’t settle this lawsuit.”

Earlier in the meeting, Hedgecock had angrily attacked SDG&E;, arguing that “we have $5 million sitting in the bank and we will not get it loose ever because this company does not have a cooperative attitude.”

SDG&E; officials argued against a delay. “This whole discussion and action is unnecessary,” said Al Ariza, SDG&E; regional affairs representative. “We’re standing before you in public asking you to give us the (bonds) so we can reduce the rates. And here we are in public saying we’re going to work out something agreeable to you (on the suit).”

The lawsuit concerns 241 acres of Sorrento Valley land on which SDG&E; in the late 1960s had hoped to build a nuclear power plant. About that time, the city rezoned the area for agricultural use and open space. In 1974, SDG&E; sued the city for inverse condemnation.

SDG&E; won damages in Superior Court but the suit was appealed all the way to the U.S. Supreme Court, which in 1981 dismissed the appeal. The court said it was not clear that any “taking” had occurred, and further proceedings would be required to resolve that question.

No more court hearings were held, City Atty. John Witt said, although after the high court ruling, “We advised the city manager to put aside $5 million in case we had to pay it.” Witt said the city indicated to SDG&E; that it would approve almost any “reasonable plan” to develop its property, but “for some reason they have been hemming and hawing” about coming in with a development plan.

Ed Gabrielson, SDG&E;’s manager of land and environment, said Monday that the utility had been “proceeding pretty rapidly.” SDG&E; now plans to build an industrial park on 100 acres and to offer the remaining 140 acres to the state or the city, he said.