Santa Clarita Mall Builder, City Fail to Complete Deal

A financial deal between Santa Clarita and the developer of the area’s first major shopping mall has collapsed, freeing the city from having to pay millions of dollars in road improvements for the project.

But the deal’s collapse also jeopardizes the city’s chances of annexing hundreds of acres of coveted commercial property.

The deal’s demise will not affect The Newhall Land & Farming Co.’s plans to complete the long-awaited Valencia Town Center by next fall, said Marlee Lauffer, a company spokeswoman. “Certainly, the mall is going forward,” Lauffer said.

But the city and the developer have been unable to complete an agreement worked out last year, Lauffer said. Under the terms of that pact, Santa Clarita would have issued bonds to pay for $9.95 million in road improvements needed for the 80-acre mall. The bonds were to be paid off with 16% of the sales taxes collected at the mall over 30 years.

In exchange for the financial aid from the city, Newhall Land agreed to let the city annex 406 acres of commercial land it owns south of Newhall Ranch Road and west of Bouquet Canyon Road. The company had agreed to grant the city easements for 4.5 miles of hiking trails along the Santa Clara River and to pay $100,000 for a center that would help small businesses adjust to the competition that the mall would create.

The 406 acres include the site of a Builders Discount, which is expected to generate $400,000 annually in sales tax revenue when it opens next year.

Newhall Land would not comment on why the deal collapsed. But sources close to the negotiations said the deal fell apart after the company learned that, under state law, the bonds issued by the city would have to be recertified annually by the City Council.

If future councils failed to recertify the bonds, Newhall Land would be responsible for paying the debt, city officials said.

The composition of the council could soon change. In April, two council members will face reelection and voters might be asked to approve a slow-growth initiative, which Newhall Land has opposed.

Newhall Land officials last year said the $180-million mall project could not be built without financial aid from the city. Lauffer would not comment Thursday on how the firm can now proceed with the project without the city’s help.

But sources involved in the negotiations with the company said construction costs have plunged because of the recession, enabling the company to finance the road improvements itself.

Lauffer said Newhall Land and the city are negotiating a new deal.

The company has asked the city to designate the mall property as a special assessment district, thus allowing Newhall Land to issue its own bonds to pay for the road improvements.

In exchange, the city wants Newhall Land to permit the annexation of the Builders Discount site.

“My price for creating the district is the Builders Discount site,” Councilwoman Jan Heidt said, adding that she also wants the developer to avoid building on the hiking trail near the river.