Placentia to settle claim by Caltrans over rail project

Placentia officials said Wednesday that they have tentatively agreed to pay $5.5 million to settle a claim by Caltrans that the north Orange County city misspent more than $36 million in state funds to finance a now-defunct rail corridor project.

The dispute involved the $650-million OnTrac project, which was shelved in 2006 after failing to receive federal funding. The project, which included sinking five miles of railroad tracks into a concrete trench, dragged the city deep into debt and forced officials to cut services and sell parkland to recoup the losses.

After almost two years of negotiations, Caltrans agreed to reduce its more than $36-million claim to $5.5 million -- a move that, city officials say, spared Placentia from filing for bankruptcy protection.

“It is a great relief that this chapter in the city’s history is about to be closed,” Mayor Pro Tem Joseph V. Aguirre said. “Everyone in the city has been focused on resolving this.”


The settlement will be financed by the Orange County Transportation Authority, which agreed to lend the city about $4.1 million. Placentia will repay the agency from the city’s future share of funds from Measure M, the county sales tax to fund transportation projects. The OCTA also will advance the city $1.4 million in state highway funds.

The City Council approved the settlement this week. Caltrans officials still need to sign the agreement.