Coastal Panel to Drop Sewer District Suit : County Will Be Able to Sell Bonds at Lower Interest Rates

California Coastal Commission lawyers have tentatively agreed to drop a lawsuit that challenges Los Angeles County’s creation of a sewer district in Malibu, clearing the way for the sale of $34 million in sewer bonds at normal market rates rather than as high-risk certificates, county officials say.

Dismissal of the state lawsuit will enable the county to sell bonds that pay about 9% interest instead of 12%. That will save Malibu property owners, who must finance the project through special assessments, about $12 million, officials said.

The county had said the sewer bonds were salable only at the higher interest rate because of concern by investors about the state lawsuit and, to a lesser degree, a second suit by the Malibu Township Council. It had threatened to sell the bonds at 12% if it was unable to settle the state lawsuit and related issues in the Township Council’s filing.

Withdraw Suit

The state and the Township Council, a 1,000-member community group, have contended that the new sewer district is illegal because it was not approved by the Coastal Commission before it was formed by the Board of Supervisors in January.

But this week, the state agreed in principle to withdraw its lawsuit and the Township Council consented to temporarily set aside its case after the county said it would quickly forward its plan to the Coastal Commission for review, according to county lawyer James W. Colbert.

The plan could go to the Coastal Commission staff by June 1 and be publicly debated within two months after that, Colbert said.

The county had intended to submit the matter to the Coastal Commission no sooner than September, when it would be seeking building permits for the system. But the Township Council maintained that commission hearings on whether the system conforms with the local coastal plan should be held much sooner.

“By (September) it’s a fait accompli, “ said council President Larry Wan. “This agreement allows us to address our concerns in the inception stage before an agency with the expertise to rule on environmental issues. . . . It’s an important victory for us.”

The agreement also allows the Township Council to return to court to press its case if it is not satisfied by the sewer plan approved by the Coastal Commission. “We have that in our back pocket,” Wan said.

Consider Several Issues

The commission will consider a variety of issues, including Township Council claims that the plan burdens about 1,250 homeowners along a seven-mile coastal strip with an unfair share of sewer fees, while businesses and large landowners in the Malibu Civic Center area will reap a disproportionate share of the benefit.

The commission will also consider requests to alter boundaries of the sewer district, claims that the sewer will spur unwanted growth and a dispute over the accuracy of county studies that say the sewer is needed because faulty septic tanks create a health hazard.

In return for the quick Coastal Commission hearing, the state and the Township Council pledged not to challenge the validity of the sewer district in court, Wan and Colbert said. That agreement eliminates much of the risk bond purchasers would have faced had the lawsuits remained active, Colbert said.

‘Joint Victory’

“This is a joint victory by the Malibu Township Council and the county in that it permits the sale of less expensive (bonds) to finance the project,” he said. “It’s a victory over the system, rather than over the litigant. This is a victory the county is delighted the property owners achieved. “

The agreements end three months of negotiations and court actions that included a ruling two weeks ago by a Superior Court judge, who denied the Township Council’s request for an order prohibiting the bond sale at high “junk bond” rates.

That ruling prompted the settlement with the council this week, Colbert said.