99 CENTS GOES TO COURT CHAIN SUING LANCASTER OVER COSTCO SITE.

Byline: Charles F. Bostwick Staff Writer

LANCASTER - In the latest twist to the city's quest to keep the Costco store and its tax revenue in Lancaster, 99 Cents Only Stores is trying to block the city from turning over the old Costco building to the shopping center owner.

Victorious in a court bid last year to bar the city from giving its Lancaster store to Costco, 99 Cents Only says in a federal lawsuit that a deal approved in November is an illegal gift of public funds and that the chain should have been given a chance to buy the Costco building.

``Once again, Lancaster has demonstrated that it will go to 'any lengths' to appease Costco and the Power Center owner, including discriminating against 99 Cent in violation of the United States Constitution,'' says the lawsuit, filed Friday in U.S. District Court in Los Angeles.

Capping two years of controversy, the City Council in November voted for three interlocking deals that give Costco 4.5 acres at the southern edge of Lancaster City Park and 13.6 acres of vacant city property just south of it, plus a share of future sales tax revenue.

Costco will build a 148,000-square-foot warehouse-style store there.

In addition, Retail Value Investment Program, owner of the Valley Central shopping center in which the existing Costco store is located, will pay the city $3 million for the existing Costco building - appraised at $9 million - and tear it down to redo the center.

The park site was picked for Costco after the city spent more than a year fighting with the 99 Cents Only chain, trying to acquire its store for expanding the present Costco building.

The city gave up that effort seven months before a federal judge ruled the effort was an illegal use of government eminent domain power to acquire private land for a private purpose.

City officials say the judge's ruling goes against two Supreme Court opinions and years of redevelopment practice in cities around California.

The new 99 Cents Only lawsuit doesn't object to the deal giving Costco the city land but seeks a court order blocking the related agreement transferring the present Costco building to Retail Value Investment Program, a Delaware limited liability company.

The transfer is a gift of public property that violates the California Constitution and is designed to injure 99 Cents Only's ``competitive edge,'' the lawsuit says.

``Ninety-nine Cent is ready, willing and able to pay, in cash, more than the settled purchase price for the existing Costco property,'' the lawsuit says.

The city will fight 99 Cents Only's lawsuit, and is already appealing last year's court ruling in conjunction with the California League of Cities and the California Redevelopment Association, City Manager James Gilley said.

``Apparently they're a very litigious company, and we're just going to have to put up with them,'' Gilley said of 99 Cents Only.

The city has no legal obligation to put the present Costco building up for sale to the highest bidder, city attorney David McEwen said. State law required the redevelopment agency to hold a public hearing on the transaction, which the city did at the Nov. 27 meeting at which the deals were approved, he said.

The 99 Cents Only chain did not tell city officials it was interested in the Costco property until about a month after the hearings, in a letter requesting city documents about the transactions, McEwen said.

The new lawsuit more properly belongs in state court, where the city tried unsuccessfully to transfer the last lawsuit, McEwen said.

The transfer of the present Costco building to the city, then to the shopping center owner, is not due to take place until Costco finishes its new building and moves in. That is expected to occur in about 1 1/2 years, Gilley said.