Santa Clarita / Antelope Valley : City Bails Out of Settlement Pact : Redevelopment: Council’s vote scuttles a deal resolving water agency’s suit over future property tax allocations.

Following a short cease-fire in the war of words between city and water agency officials, the feud seems to be back in full force, fracturing a 2-month-old agreement that was to settle a lawsuit against Santa Clarita’s $1.1-billion redevelopment plan.

The battle concerns millions of dollars in expected tax revenues generated over the next 30 years as property values rise. Santa Clarita wants the money for redevelopment, but the Castaic Lake Water Agency wants the funds to pay off bond debts incurred for various construction projects.

Under an agreement signed by both governing boards in November, the agency was to drop its suit in exchange for the plan’s reduction by one-fourth and the safeguarding of tax income that the agency uses to pay bond debts.

But City Council members, meeting in closed session Tuesday night, decided to pull out of the agreement because water agency officials are now insisting on legislation to guarantee protection of their tax income.

City officials say the water agency is attempting to delay the 30-year redevelopment plan by breaking the agreement.

“It appears this whole thing has been a stall,” Mayor Jo Anne Darcy said. “We need to get this earthquake recovery going.”

Water agency officials say they’re simply trying to protect their tax income with something more substantial than a court ruling on a civil lawsuit.

“We don’t see it that the conceptual recommendation has fallen apart,” said Robert Sagehorn, agency executive director. “We see it that in order for it to be secure, the legislation (is necessary).”

Sagehorn said the legislation could be secured in three months.

“For the city to declare their intention as wanting to go to the courts without trying to settle this, including with legislation in Sacramento, is ridiculous and financially absurd,” Sagehorn said.

The agreement between the city and agency called for Santa Clarita to reimburse half of the estimated $48 million in tax income that the agency is expected to lose to the redevelopment plan. If the agency does pursue legislation, it may try to rework the agreement so that it is reimbursed for the entire $48 million, Sagehorn said.

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Legal action by the agency has held up the redevelopment plan for 11 months. City Council members approved it in February to aid recovery from the Northridge earthquake, improve roads and other infrastructure, redevelop blighted areas and build affordable housing.

City Atty. Carl Newton is expected next week to request a court date to settle the lawsuit.

This is the second time that the city and water agency appeared to have settled the suit, only to have it fall apart.

But both sides sound amenable to trying again.

“We’re appalled that the city is backing off,” Sagehorn said. “We continue to want to work this out.”

“If the agency wants to come in, very quickly, with a proposal that would work, sure,” Darcy said. “If they want to negotiate in good faith, the door is open.”