Builder Wins $2 Million in Water Battle : Growth: Palmdale and Los Angeles County agree to settle a 2 1/2-year fight with developer of Antelope Valley’s 1,307-acre Rancho Vista community.

Los Angeles County and the city of Palmdale agreed Friday to pay a major Antelope Valley developer $2 million to settle a 2 1/2-year-old lawsuit stemming from a dispute over development rights and water entitlements.

Rancho Vista Development Co., developer of the 1,307-acre master-planned Rancho Vista community in west Palmdale, is expected to get more than $1.3 million from the county and nearly $700,000 from the city under the settlement, the company’s attorney said.

Attorney Steven Kaufmann, representing Palmdale, said city officials had already approved their share of the payment. But to finalize the deal and avoid a trial, the county’s share still must be approved by the Board of Supervisors. The approval will probably happen within the next two weeks, he said.

Rancho Vista general partner Gregg Anderson had shocked Palmdale officials recently by filing a demand for damages of nearly $7.3 million. The final $2-million settlement for the lawsuit was what Anderson had been publicly demanding to avoid a trial.

Anderson’s attorney, Terry Giles, said his client was satisfied with the outcome. But at a special meeting of the Palmdale City Council on Thursday night, Giles warned the city’s lawmakers that the case was “a slam dunk” and accused them of trying to defraud Anderson.

The developer, in the suit filed in April, 1990, claimed the county and the city reneged on a 1987 agreement between Anderson and the county. Under that agreement, Anderson was essentially entitled to sell his rights to water provided by a local water system to other developers if he were to reduce the density of his own project.

In early 1988, the Palmdale City Council approved Anderson’s plan to downsize Rancho Vista’s development entitlement from 7,266 housing units to 6,071. But Anderson maintained the city and the county then blocked any sales of water rights, and also refused to restore the 1,195 units.

However, Palmdale officials maintained the agreement was illegal and Anderson was not entitled to all of the proceeds. The city argued that a large share of any money from the sale of water rights should have gone to the 3,100 property owners, including Anderson, who are paying for a water system.

The $4.4-million water system was built by a city-sponsored assessment district covering an area of about 2,050 acres, including the 1,307-acre Rancho Vista project. Under that arrangement, property owners--either developers or homeowners--pay fees over 20 years to pay off the cost of the system.

Under the settlement, the county and city will own the excess water entitlements that had been the subject of the legal dispute. And both the city and the county said they intend to sell the water rights to other developers, thus raising money to reimburse them for the settlement.

Kaufmann, Palmdale’s attorney, said there are 755 so-called water units. City officials said they have a value of about $2,000 each, meaning the city and the county together might recoup $1.5 million of the settlement. Kaufmann said the city’s insurance will pay another $300,000.

The county’s financial share of the settlement falls on county Waterworks District 4, which serves Lancaster and the Rancho Vista area. But because the county expects to recoup much of its costs, county officials predicted the settlement will not force any increase in customers’ water rates.