99 CENTS ONLY DROPS SUIT CITY'S COMPLEX COSTCO DEAL GETS CLEAR SAILING.

Byline: Charles F. Bostwick Staff Writer

LANCASTER - City officials have cleared up the last legal challenge in their struggle to keep the Costco store and its tax revenue in Lancaster.

The 99 Cents Only Stores chain has agreed to drop a federal lawsuit that sought to block the city from turning over the old Costco building to the Valley Central shopping center owner, city officials said.

``Everything is settled, and everybody is happy,'' said Mayor Frank Roberts.

After nearly three years of controversy, Costco is scheduled to take possession Monday of 4.5 acres at the southern edge of Lancaster City Park and 13.6 acres of vacant city property just south of it.

Costco wants to build a 148,000-square-foot warehouse store with room for a gasoline station and other features that won't fit at its 125,000- square-foot Valley Central shopping center store.

The transfer of the park property was not delayed by the lawsuit, which concerned only the transfer of the current Costco store building to the owner of the shopping center in which it sits.

The 99 Cents Only chain had been victorious in an earlier court bid to bar the city from giving its Lancaster store to Costco. City officials are appealing that decision.

99 Cents Only agreed to drop its second lawsuit if city officials would not seek reimbursement of attorneys' fees, City Manager Jim Gilley said.

City officials said they did not know why 99 Cent Only Stores dropped the lawsuit. The settlement document says it was to avoid costly litigation.

The company's chief executive officer and the attorney handling the case for the chain did not return telephone calls.

Officials of 99 Cents Only said in the second lawsuit, filed in January in Los Angeles, that the shopping center deal was an illegal gift of public funds and that the chain should have been given a chance to buy the Costco building.

This was the last lawsuit pending over the controversial Costco deal. Last month, city officials reached a settlement with a Lancaster couple who had filed their own legal action objecting to transferring the 4.5 acres of park property to Costco.

City and Costco officials agreed to build a new park to get Emmett and Robin Collins to drop their legal action seeking a court order stopping work until an environment impact report was prepared.

Costco will buy 10 acres on 30th Street West north of Avenue M, and the city will turn that land into a park. In return, Costco will get five acres of city property north of Avenue J near 20th Street West.

The new park will be named for Forrest E. Hull, a retired eye surgeon and member of Lancaster's first City Council.

The city is already developing 68-acre Whit Carter Park, named for a Lancaster pioneer, on Sierra Highway near Avenue H.

Retail Value Investment Program, owner of the Valley Central shopping center, will pay the city $3 million for the current Costco building, then tear it down to redo the center. The Costco building is appraised at $9 million, but city officials said it is so big it would be hard to find a tenant who could use it.

City officials said they were convinced Costco would move to Palmdale - where competitor Sam's Club is planning to build a warehouse store at 10th Street West and Avenue O-8 - if they didn't find a place to put it in Lancaster.

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 so that Costco could expand at its current site. Costco officials turned down sites other than at Avenue L and 10th Street West, city officials said.