Santa Clarita / Antelope Valley : Palmdale Council OKs Auto Mall Deal : Government: The city will buy out the struggling center’s developer in a $6-million arrangement.

Without comment, the City Council has approved an estimated $6-million deal to buy out the private developer of the city’s struggling 2-year-old auto mall and gain ownership of the remaining 37 undeveloped acres in the area.

The council’s 5-0 vote Thursday night will more than double the city’s $5.2 million investment in the 65-acre Antelope Valley Auto Center along the Antelope Valley Freeway. The city now will have complete control over how the remaining vacant half of the project is developed.

Palmdale officials acknowledged a city takeover of the mall was not part of their original plan. But they said it became necessary after mall developer William Royster failed to pay property taxes and special assessments brought his undeveloped land near to foreclosure.

Under the deal, the city will get the remaining 27 acres of undeveloped mall property owned by Royster’s partnership, its contractual share of future sales tax revenue from the mall and the right to buy at a yet-to-be-determined price an adjoining 10-acre parcel owned by another party.

The city will pay Royster $1.5 million for his land and $2.3 million in notes due in 10 years for his sales tax rights and forgive a $241,341 debt. The city will also spend $1.47 million to pay off delinquent property taxes and assessments owed by Royster and the other property owner.

Palmdale Mayor Jim Ledford said City Council members did not have much to say publicly Thursday because they had been negotiating the deal behind closed doors with Royster off-and-on for the past 18 months. Ledford maintained the city got a good deal for the price.

“We’re talking long-term here,” he said. “This project is not going to bring us glory today. But I think it’s going to be important in the long run. For the money we spent, I think the potential returns are vast. I think it will be a wise investment.”

For Palmdale, the auto mall represents a potentially major source of sales tax revenue critical to the city’s finances, since the city does not get a share of property tax dollars. The mall in coming years is projected to generate more than $1 million a year in sales tax revenue.

Council members said the city could not afford to develop the mall when real estate prices were at their peak in the late 1980s so they turned to Royster. But now that values have fallen dramatically, they said the city was able to buy his assets for one-third of his original asking price.

The city’s purchase should not affect the five auto dealers already open at the mall, since they own their sites. The council on Thursday also approved a $360,000 loan to help Grubl BMW-Subaru, a sixth dealer, open its facility. And the city is negotiating to recruit a Saturn dealership.

The city’s plan to purchase the extra 10-acre site from Frank Germano is likely to cost at least another $500,000. And the city, once it owns the 37 acres, will also be liable for special tax assessments totaling $636,000 a year that run with the property to repay development debts.