Oceanside Settles With Developer : Lawsuit: Agreement reached with Marlborough Development on ordinance that scuttled housing project.

The Oceanside City Council reached agreement Monday with a housing developer, settling a $30-million lawsuit against the city.

After a closed session, the council approved the agreement with Marlborough Development Corp. on a 4-0 vote. Councilman Sam Williamson was absent.

Marlborough filed suit against the city in January after the City Council passed an ordinance creating a 900-acre district on the city’s east side. The district is intended to maintain a rural atmosphere. It requires that house lots be large enough to accommodate horses and that adjacent areas have trails and nature paths.

But, as passed last December, the ordinance would have scuttled all of Marlborough’s 124-acre project area, which falls within the special district. The council’s slow-growth majority of Melba Bishop, Nancy York and Don Rodee voted in favor of the ordinance; Mayor Larry Bagley and Williamson opposed it.

Marlborough’s attorneys quickly responded with a lawsuit, claiming the city had reneged on an agreement.

Marlborough said the district’s requirements that 7,200 square feet of each lot be set aside for equestrian-related items such as a corral, feed storage and an exercise yard would have reduced the project from 260 houses to 150, resulting in a potential loss to the corporation of $15 million. The average lot size of the development as originally designed would be 10,000 square feet.

The company also said it already had spent nearly $30 million on the project for public improvements, bonds and interest payments.

Indeed, several months before the City Council passed the ordinance, the city had approved a tentative map and development plan for the project, granted a conditional use permit and general-plan variance, exempted the project from Oceanside’s growth-management plan and issued a grading permit. The corporation had only one step left before breaking ground: pulling building permits.

Because of the advanced stages of the project, City Atty. Dan Hentschke advised the council to exempt it from the rural district.

After nine months of negotiations, the settlement requires Marlborough to make only a small reduction in the number of houses, to 254. Marlborough also has agreed to place $160,000 in a trust fund to pay for city maintenance of trails and open space. An equestrian park, once proposed by Marlborough in earlier settlement discussions but opposed by residents of the area, was dropped.

“This matter has been a sword hanging over the project for the last year and a half,” said Dorian Johnson, Marlborough vice president. “Marlborough made some major concessions, but on the balance we’re pleased with (the settlement).”

Oceanside city spokesman Larry Bauman said that, even with the development’s near-original density, “all of the lots in the project will be large enough to accommodate horses.” But he added that “there may be problems with setbacks with some of the homes.”

The city will encourage owners of those properties to apply for zoning variances, he said, to allow enough space between houses and horses.