Legal Costs Mount in Downey Renewal : 3-Year-Old Expansion of Firestone Blvd. Project Is Stymied Awaiting Court Appeal

This city has spent more than $250,000 to defend in court a 1984 redevelopment plan that a judge invalidated, and the legal expenses continue to mount even though the City Council approved a similar renewal plan last month.

In addition, the city has spent more than $20,000 to defend Councilman James S. Santangelo against a misdemeanor conflict-of-interest charge resulting from his vote to approve the stymied redevelopment plan.

Councilmen Robert G. Cormack, Santangelo and former Councilman Bob Davila voted in April, 1985, to reject a settlement offer from a neighborhood organization that sued the city over its redevelopment plans. Council members Diane P. Boggs and Randall R. Barb opposed the decision that has now kept the case in court for more than two years.

“I’ll still feel we did the right thing,” Cormack said the other day.

Legal Fees Paid

The city has paid $247,295 to the law firm of Stradling, Yocca, Carlson & Rauth in legal fees related to the lawsuit filed by Downey CARES, according to a city spokesman.

Downey CARES is composed of property owners along Firestone Boulevard who were fearful of the condemnation powers that the city would have gained under the redevelopment plan.

Another $12,277 in legal fees related to the case has been paid to the law firm of Burke, Williams & Sorensen, the firm of Downey City Atty. Carl Newton. Briefs in the case have been filed with the 2nd District Court of Appeal, but a hearing date has not been set, a court spokesman said.

If the city loses the case, it also stands to lose hundreds of thousands of dollars in property tax revenue it would have received if the redevelopment expansion had gone forward under the settlement, officials said.

Cormack blamed Downey CARES and its former president Paul Sarvis for any losses related to the lawsuit. Sarvis, now a Santa Ana resident, lived in Downey until last summer.

“Paul was not trying to work with the city, he was trying to destroy the city,” Cormack said.

Protecting Their Rights

But Sarvis said he and the other members of Downey CARES were only protecting their property rights. He added that a judge backed their opinion that the City Council erred in forming the redevelopment district.

“If they had properly notified the affected people (and) if they had told Mr. Santangelo he could not vote, then none of this would have happened.”

Downey CARES sued the city after the council voted 3-2 in July, 1984, to approve Amendment 3. The redevelopment plan added 380 acres to Downey’s redevelopment district along Firestone Boulevard.

A Superior Court judge invalidated the plan in September, 1985, ruling that Santangelo had a conflict of interest because he owned property in the original district and in the expanded area. Downey’s original 125-acre district was established in 1978.

The judge also found that the city did not follow state law that calls for selecting a committee of residents to review redevelopment plans. The city appealed.

Downey CARES had offered to settle the lawsuit before it was considered in court. The city was to agree not to use its power of eminent domain to acquire property for redevelopment in all but a few areas of the district. In return, the residents’ group would have dropped the suit. Each side was to pay its own legal costs.

Point of Disagreement

But talks broke down after five months. The sticking point: Downey CARES wanted the city to agree to pay as much as $285,000 to the group if future city councils decided to break the agreement and condemn their property.

In voting against the settlement, the City Council went against the advice of its lawyers and former City Manager Robert (Bud) Ovrom, who is now city manager of Burbank.

Meanwhile, the city began working on a substitute redevelopment plan to add 305 acres to Downey’s redevelopment district. The plan--Amendment 4--was unanimously approved by the council last month, with Santangelo abstaining.

The council bowed to public pressure and eliminated its option to use eminent domain for further redevelopment in the expanded area.

Downey CARES attorney Dale L. Gronemeier said the council ended up giving his clients more than they sought through the settlement offer. Under the proposed settlement, the city could have used its power of eminent domain in some areas of the new district.

“It was a deal that could have been made back then that could have protected my clients’ interests--that is to have their land protected,” Gronemeier said. “Certainly from hindsight . . . it was an awful good deal for them (the city).”

How Redevelopment Works

When a redevelopment district is created, property taxes used to support traditional government services are frozen. Additional tax revenue from the higher value of redeveloped properties is then diverted to the redevelopment agency. The agency uses that money to promote redevelopment by financing public improvements, providing developers with discounts on land prices and other incentives.

Amendment 3 established property values within the district at 1983-84 levels and tax revenue from the increased value of the property has been accumulating in an impound account managed by Los Angeles County, said Jim Cutts, Downey’s director of community development.

If Downey were to win the appeal and the redevelopment plan were to take effect, the city would receive about $200,000 in the account, Cutts said.

The “vast majority” of the legal work on the appeal has been done, said Paul L. Gale, a lawyer representing Downey. But there could be additional legal expenses if the appellate court rules against Downey and the city petitions for a rehearing or appeals the case to the state Supreme Court, he said.

If the city loses the case it will have to pay Downey CARES and two affiliated property owners the $218,221 awarded by the lower court, plus interest. Gronemeier said his firm’s work on the appeal is worth $20,000 to $25,000.

Supporter of Eminent Domain

Despite the potential legal expenses, Cormack said the city should continue to appeal the case for tax revenue from Amendment 3, to avoid paying the award to Downey CARES, and because Amendment 3 would give the city the power of eminent domain.

“There’s no denying that eminent domain is best for the landowner and best for the city,” said Cormack, probably the City Council’s strongest supporter of eminent domain.

Councilwoman Boggs laments that the city did not settle with Downey CARES.

“It was a difficult compromise, but it seemed it was very workable,” Boggs said. “It gave them the protection they wanted and what we basically needed. We’ve lost three years of tax increment money from it.”

Santangelo was charged in July, 1986, with a single conflict-of-interest charge for his vote to approve Amendment 3. Later that month the City Council voted to pay for Santangelo’s legal defense, which has amounted to $20,092, according to city records.

Both Cormack and Boggs said the city should pay to defend Santangelo for what Boggs called a “nuisance” charge. Santangelo is scheduled to be tried Oct. 19. Santangelo declined comment because of the criminal charge against him. Barb and Councilman Roy L. Paul did not return telephone calls last week.

“I would resign immediately if I thought I were going to get clobbered for punching a button (casting a vote),” Boggs said. “I think the taxpayers are getting ripped off all the way around on it.”