Downey Decides to Give Up Long Legal Fight on Redevelopment

City officials Tuesday gave up a long-running legal fight over redevelopment after a state appellate court ruled that Councilman James S. Santangelo had a conflict of interest when he voted to establish a redevelopment zone.

Councilman Randall R. Barb immediately called for Santangelo to resign.

“Costs to the City of Downey is the most devastating financial loss I can ever recall,” Barb said, referring to the hundreds of thousands of dollars the city will spend in legal fees. Barb also noted the city will lose property tax revenue that it would have received had the redevelopment plan not been invalidated by the courts.

Barb said Santangelo should resign because the embattled councilman would have to abstain from deciding future redevelopment issues. Santangelo owns a Downey real estate business and could profit from rising property values due to redevelopment--a conflict of interest according to the appellate court decision.

“I think we’re being crippled by his inability to participate in government fully,” Barb said.

Barb also asked the council to stop paying Santangelo’s legal defense bills stemming from the case. The district attorney charged Santangelo with misdemeanor conflict of interest. He is to be tried Jan. 4 in Downey Municipal Court.

The council probably will not consider Barb’s proposals until its Jan. 12 meeting, an official said.

“At this time I have no intention of resigning,” Santangelo said in an interview. He would not comment further on Barb’s comments, nor on the council’s decision to accept the appellate court ruling. Santangelo was elected to the council in 1984 and his term expires in June.

The California 2nd District Court of Appeal on Monday upheld a lower court decision that invalidated the 386-acre redevelopment area approved by the council in 1984. A group of property owners called Downey CARES filed the lawsuit opposing the redevelopment area. The residents said they were fearful the city Redevelopment Agency would use eminent domain to acquire their property.

The City Council met in closed session Tuesday to decide whether to file for a rehearing or appeal the decision to the California Supreme Court.

“I’m not willing to spend any more money to see if the (state) Supreme Court will hear it or not,” Mayor Diane P. Boggs. “It’s over. That’s the main thing.”

Downey lost a small fortune in property tax revenue and legal expenses in the case:

If the plan had remained in effect for 30 years as approved, the city Redevelopment Agency would have received about $5 million more than it will receive under an alternative redevelopment plan approved last July, said Jim Cutts, director of community development.

The appellate court affirmed the award of $218,221 in attorneys fees to the plaintiffs. It also awarded the plaintiffs’ attorneys fees for the cost of fighting the appeal, which are to be determined by the trial court. Those costs should amount to about $35,000, said attorney Dale L. Gronemeier, who represents Downey CARES.

Downey has spent $267,183 on its own legal expenses to defend the redevelopment plan, and more than $20,000 on the legal defense of Santangelo, said Lee Powell, director of administrative services.

While one redevelopment plan was tied up in court, Downey began work on another, similar plan. The invalidated plan would have added 386 acres to the city’s original 125-acre redevelopment district along Firestone Boulevard, Downey’s main commercial zone.

Last July, the City Council approved a 305-acre addition to its Firestone redevelopment district. But unlike the invalidated plan, the new one does not give the Downey Redevelopment Agency the power of eminent domain for further redevelopment. Santangelo abstained from voting on the new plan.

A Downey CARES spokesman said the appellate court sent a strong message to the city.

“It’s a tremendous victory. It’s been a long road,” said Michael E. Sullivan, president of Downey CARES. “I would hope it would mean that local citizens shouldn’t have to fork out a lot of money and time to protect their basic property rights.”

Downey CARES sued after the City Council voted 3 to 2 in 1984 to approve the 386-acre plan, with Santangelo casting the deciding vote.

A Superior Court judge invalidated the plan in September, 1985. The judge ruled Santangelo had a conflict of interest because he stood to profit as a real estate broker and because he owned property in the original district and in the expanded area. Property values in the district were expected to rise with redevelopment.

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

Because the appellate court affirmed the trial court decision based on Santangelo’s conflict of interest, it did not consider the issue of the citizens committee.

“The trial court . . . was justified in concluding the adoption of the redevelopment plan was reasonably foreseeable to materially affect Mr. Santangelo’s financial interest,” the appellate court found.

In the past, Santangelo said he voted after receiving bad advice from City Atty. Carl Newton. He has since declined to comment on the case.

The appellate court decision left ample room for second-guessing. The City Council in 1985 rejected a settlement offer to avoid the lengthy and expensive legal battle.

Downey CARES offered to settle the lawsuit if the city agreed not to use its power of eminent domain to acquire property for redevelopment in all but a few areas of the district. The group also wanted the city to pay as much as $285,000 to the group if future city councils decided to break the agreement. In return, the group would have dropped the suit. Each side was to pay its own legal costs.

Councilmen Robert. G. Cormack, Santangelo and former Councilman Bob Davila voted to reject the settlement. Boggs and Barb wanted to settle.

Property owners have not challenged the new, 305-acre redevelopment area.

“The latest redevelopment plan was responsive to the community’s interest,” Gronemeier said.