Hidden Hills Will Pay $1 Million to Developer : Lawsuits: The affluent community’s budget will be strained by paying damages over an agreement that would have allowed low-cost housing for the elderly.

The exclusive, gated community of Hidden Hills agreed Thursday to pay $1 million to settle a lawsuit charging that it reneged on an agreement to let a developer build low-cost housing for the elderly.

Developer Danny Howard--whose plan was fatally delayed by opposition from residents--will receive the payments over a five-year period, city officials said.

Nevertheless, the settlement will strain the resources of the town, which has a population of 2,000 and an annual budget of only $700,000.

Mayor H. Brian Herdeg said the first annual payment of $350,000 will come from the city’s reserve fund of $900,000.

The city may have to sell some of its properties to replenish that account, he said.

Howard’s plan for 46 units of housing on four acres--outside the city gates but within the city limits--stirred the passions of Hidden Hills residents who said they wanted to keep their community of million-dollar homes an “island in a sea of urban growth.”

In the summer of 1989, shortly after the project was proposed, an anonymous letter circulated to residents warned that tenants of the new project could vote in city elections, serve on city commissions, and use all city-owned facilities, including the swimming pool and tennis courts.

“Is this really what we want for our community?” the note asked.

Taken aback by vehement public opposition, council members refused to approve the project, saying that they needed more time to consider outstanding environmental issues.

The project became the key issue in municipal elections in April in which three council members who defended the project were voted out.

In May, still without the city approval to go forward, Howard lost his option to buy the property.

Howard’s attorney, Benjamin M. Reznik, called the settlement a major victory for his client.

“They delayed the process for so long that our client lost his right to buy the land,” Reznik said. “They thought they could get away with stalling this process as long as they wanted to.”