Santa Clarita Drops Redevelopment Plan

The city scrapped its $1.1-billion redevelopment plan Wednesday, conceding that it faced years of costly court battles that could stall earthquake reconstruction indefinitely.

The move came as part of an out-of-court settlement with the Castaic Lake Water Agency that permits both powerful entities to save face after months of public bickering in which both claimed to have the public’s best interests in mind.

“What we really recognized was that we were gaining nothing except further litigation,” said Carl Newton, the city’s attorney. “We felt it better to cut our losses.”

The two sides signed their agreement Wednesday, the same day the matter was set for trial. Under the settlement, negotiated with the guidance of Superior Court Judge David A. Horowitz, the city agreed to drop its post-earthquake plan, which tried to use state disaster laws to expedite construction.

In exchange, the city was freed from having to pay the water agency’s legal fees. The city had estimated those fees could hit $1 million, though the water agency’s attorney, R. Bruce Tepper Jr., put them at less than half that amount.

The agreement means the city can never again pursue a similar redevelopment plan, which the water agency alleged was trying to exploit disaster laws to circumvent environmental regulations.

Meanwhile, the water agency, which filed suit against the city in 1994, successfully quashed the city’s ambitious post-earthquake redevelopment plan, which it had also opposed because it feared losing its share of local property tax revenues. Tepper said other agencies also stood to lose revenues from the property taxes, which Santa Clarita wanted to use for 30 years to finance the redevelopment project.

“The water agency is pleased as to how it turned out,” Tepper said. “They are also pleased to be relieved of the financial obligations of having carried this lawsuit for the entire county.”

The estimates of how much the water agency could have lost were controversial, with the agency contending it could have lost as much as $850 million if growth rates in the Santa Clarita Valley exploded, or $100 million if growth rates were lower. The city disputed both figures, estimating the loss to be closer to only $60 million.

The revenue stream from property taxes was critical to the water agency, which has built extensively using debt, and has an ambitious building plan for the future as the Santa Clarita Valley grows.

Losing property tax revenues could have endangered the water agency’s AAA bond rating, making it more expensive for the public agency to borrow money and making water more expensive for its customers, water officials said.

“Our sole objective is to provide a reliable supply of water,” said Bill Cooper, the president of the water agency’s board. “Redevelopment threatened that.”

The settlement returns the city to the same reconstruction predicament it faced after the 1994 Northridge earthquake inflicted $144 million in private-property damage.

“We still have areas that are deteriorating that need assistance,” City Manager George Caravalho said.

Santa Clarita is likely to try a new redevelopment plan, probably for the old Newhall area, in a continuing effort to revitalize areas blighted even before the quake.

But Newton said redevelopment would be pursued under traditional redevelopment laws, rather than using the disaster provisions attempted after the earthquake.

After two years of fighting, however, some just seemed glad it was all over.

“There’s nothing to be gained by continuing to bear any kind of grudges,” Councilman George Pederson said.