Judge Backs Use of Funds for Lancaster Overpasses : Finances: The ruling upholds the city’s right to shift $24 million in housing money. But the redevelopment firm that challenged the proposal has vowed to appeal.

A judge on Friday upheld Lancaster’s right to spend $24 million in housing funds on building two highway overpasses, ruling the city’s plan does not violate state redevelopment law or involve an illegal conflict of interest by the city’s attorney.

The ruling by San Fernando Superior Court Judge David Schacter was a first-round victory for the city. But the Los Angeles redevelopment law firm that challenged Lancaster--arguing that under state law the money must be spent more directly for housing--vowed an immediate appeal.

Meanwhile, City Atty. David McEwen said after the brief hearing that despite its victory, Lancaster is considering scaling back its proposed use of the housing money by relying on other funding sources. He offered to try to “come to terms” next week with the plan’s foes.

The law firm of Kane, Ballmer & Berkman challenged the city’s plan, contending that the city was illegally trying to shift the money--which must be used to promote low- to moderate-income housing under state law--to construction of the overpasses, a public works project.

But Schacter resoundingly rejected that argument Friday, saying development of the two overpasses is housing-related because it will provide access to undeveloped areas of the city, permitting housing to be built there. The city plans one overpass on Avenue L and another on Avenue H, both over the Sierra Highway.

“We have land now that is absolutely inaccessible. That’s what makes this unique and different. If there’s no access, there’s not going to be any housing,” said Schacter, the supervising judge in the San Fernando court and a former deputy city attorney in Los Angeles and Long Beach.

Kane Ballmer attorney Kathryn Reimann said, however, that under state law the expenditure of housing funds must be more closely linked to providing low-income housing. She said the judge’s ruling, if it stands, could lead to widespread abuse of such funds in other jurisdictions.

McEwen praised the ruling, calling the city’s plan “creative yes, illegal no.” The city maintains that its plan is legal because it also includes financial incentives to developers who choose to build low-cost housing in the land opened up by construction of the overpasses. But McEwen said the recession and state budget cuts may force its rethinking.

Meanwhile, Schacter also rejected the law firm’s contention that McEwen has a conflict of interest that invalidates the city’s plan. McEwen stands to earn a bond counsel’s commission on the sale of bonds for the projects, which he helped promote as Lancaster’s city and redevelopment attorney.

The state Fair Political Practices Commission has questioned such arrangements, warning McEwen’s law firm against a similar arrangement in another city. But the judge dismissed the accusation, saying, “Every decision we make, unless we’re living in some altruistic society, is affected by what puts bread on the table.”

Months ago, Lancaster’s City Council and city manager asked McEwen to seek the political commission’s advice on the propriety of his triple legal role in Lancaster. As of Friday, McEwen still had not, but promised to do so next week. McEwen and many other private attorneys maintain the practice is legal. The city has already awarded a construction contract for the Avenue L project, the first of the two overpasses, but only after substituting non-housing funds for the task. McEwen said the city will not proceed with its original financing plan until the legal dispute is settled.