Proposal Would Allow Railroad to Claim Huge Donation for Parcel : Controversy: A state official says half the beach-bluff land that Southern Pacific wants to give Huntington Beach is owned by the state.

City officials said Wednesday that Southern Pacific Transportation Co. will be allowed to claim a potentially huge tax writeoff for donating land that, according to the state attorney general’s office, it does not fully own.

The deal involves a three-acre strip of beach-bluff property proposed for the site of the controversial Pierside Village redevelopment project at Pacific Coast Highway and Main Street. In a previous controversy involving the same project and parcel, the city came under heavy criticism for allowing the Huntington Beach Co., one of the two other part owners of the land, to claim a $3-million charitable donation for ceding its interest in it to the city. The city had valued the entire parcel at $10,000.

Now Southern Pacific, one of the part-owners, is proposing to donate its interest in the parcel. But, according to state Deputy Atty. Gen. Robert G. Collins, more than half the land the railway wants to donate is actually tidelands owned by the state.

Roy Dickson, a Los Angeles attorney for Southern Pacific, said the company is not trying to give away an interest in land it does not fully own. Dickson said he deplored “someone delving into” the proposed land deal “and making something evil of it.”

The three-acre strip has, in fact, had a public easement on it since 1932. The easement gives the public the right to use it.

The attorney general’s office has become involved in a legal battle to protect the easement and to prevent the city’s putting more commercial structures on the beach, which is what the city proposes to do in the Pierside Village project. The case will open Monday in Orange County Superior Court.

Besides challenging Southern Pacific’s title to part of the land, Collins also charged Wednesday that the deal is “highly questionable” because it would allow the railway to value the donation as if it had clear title to the land.

According to the attorney general’s office, the complex issue involves a long-running controversy whose outcome will have implications for other California beach cities.

At the heart of it, according to Collins, is the need to protect the public’s access to state-owned tidelands and beaches.

The Huntington Beach parcel was owned by Chevron USA, Southern Pacific and the Huntington Beach Co. In 1932, the city obtained a court order granting a public easement on the entire three-acre strip. In 1986, however, the city proposed to lease the land for a “restaurant row” for the Pierside Village project. Plans envisioned a plaza in the area that would include four or five restaurants.

Before the city could start the project, however, it needed to gain clear title to the property. It sought, by eminent domain, to purchase the ownership rights from Chevron USA, Southern Pacific and the Huntington Beach Co.

That year, it sent the Huntington Beach Co. a letter saying it had assessed the fair market value of the land at $10,000. The land company refused the offer for that amount, but it later told the city that it would donate the land if the city would agree that it was actually worth $3 million.

Debbie Cook, a spokeswoman for Save Our Parks, which opposes the Pierside Village project, charged in January that the Huntington Beach Co. had received a $3-million tax writeoff “for giving away nothing” and that the company was allowed to value the land as if it had no legal encumbrance, such as the public easement.

Cook had similar criticism of the proposed donation arrangement for Southern Pacific. “This arrangement talks as if the public easement doesn’t exist, but only the court can end that easement,” Cook said.

Under the terms of the proposed agreement, the city would not question whatever appraisal Southern Pacific puts on the land. The agreement says the appraisal will be determined as if there were no public easement.

“Isn’t this some kind of a fraud?” Cook said. “Allowing this kind of a tax writeoff would allow millions of dollars in lost state and federal taxes.”

But Dickson said the company “considers that the easement has been terminated.” Dickson also said that Southern Pacific disputes the attorney general’s office’s claim that about half the land proposed in the company’s donation actually belongs to the state.

“There is no doubt but this is our land,” he said.

Collins said he had read a copy of the proposed land deal with city and that the proposal calls for the railway to donate about 247,000 square feet of land, 127,000 square feet of which the state owns.

Robert Sangster, deputy city attorney, said Wednesday that the city will not dispute the appraisal Southern Pacific places on its donation. He said the City Council will probably convene in a special meeting later this week to vote on whether to accept the deal.

Sangster said that since Chevron and the Huntington Beach Co. have already deeded over their claims to the land, the Southern Pacific donation would give the city total ownership of the property. Having that will enhance the prospects for building the Pierside Village project there, Sangster said.