Hidden Hills to Scrap Redevelopment Panel, Says It Serves No Use : Agreements: The affluent, gated community admits a mistake. It will disband the agency in December and return a portion of the money to the county.

The Hidden Hills Redevelopment Agency--the target of criticism and legal challenges since its inception six years ago--will disband next month, the Hidden Hills city attorney said Friday.

“The city had no use for a redevelopment agency,” City Atty. Michael Jenkins said. “It was a mistake.”

Under a tentative agreement with Los Angeles County, the city will dissolve the agency and return a portion of the redevelopment money it has received to the county, which will use the money to build low-income housing.

The city no longer wants the agency because under state law a portion of the redevelopment money it is collecting from the county must be spent for low-income housing inside the boundaries of Hidden Hills, a gated, affluent community of 2,000 residents. The requirement had infuriated many residents who did not want such housing in their neighborhood.

The city created the agency in 1984 to raise money to build a storm drain along Long Valley Road. County officials, however, filed a lawsuit contending that the city was abusing state laws by declaring itself a redevelopment area, a designation usually reserved for blighted inner-city neighborhoods.

The lawsuit was dropped in 1988 after the city agreed to spend 20% of the redevelopment money on low-income housing and the county agreed to build the storm drain project.

Some city officials then moved ahead with plans to use redevelopment money on a combined residential-commercial-office complex that would have included low-income housing. But residents objected when they learned that developer Danny Howard’s proposal included a 46-unit apartment building for the elderly on city land outside its gates. The City Council failed to approve the project in the face of the opposition.

In December, Howard filed a $10-million lawsuit against the city, contending he had lost money because Hidden Hills had reneged on an agreement to let him proceed with the project. The city agreed Thursday to pay Howard $1 million to settle that suit.

As part of the agreement to disband the redevelopment agency, some of the money will pay for environmental studies and easements needed for construction of a storm drain. The remainder will be given to the county for affordable housing, Jenkins said.

Deputy County Counsel Manuel A. Valenzuela Jr., who is working with Jenkins to dissolve the agency, said although the county has agreed to build the storm drain for Hidden Hills, the city will be responsible for buying easements and completing the necessary environmental studies.

Jenkins also said the city will try to relinquish jurisdiction over the 26 acres it annexed from the county--land on which Howard had planned to build the low-income housing and an office building and retail center.