BANKRUPTCY SETTLEMENT FOR RFI NEARS DEAL WOULD CLEAR WAY FOR SALE OF FORMER BERMITE PROPERTY.

Byline: Eugene Tong Staff Writer

An Arizona judge is close to approving a settlement in the bankruptcy case against the owner of the former Whittaker-Bermite property in Santa Clarita, which has tied up development on the contaminated but valuable property in the city's center for years, a court official said.

On Tuesday, Judge Charles G. Case II at the U.S. Bankruptcy Court in Phoenix reviewed and resolved objections to Remediation Financial Inc.'s proposed settlement, including those filed by the city of Santa Clarita and the Castaic Lake Water Agency.

While a ruling has not been issued, Case said he will approve the settlement when an order is presented, which is expected today, said Terry Miller, clerk of the court at the bankruptcy court.

``The court has responded to the concerns expressed by the city, and we're pleased with that,'' Santa Clarita City Attorney Carl Newton said. ``I think it's moving along in an orderly manner.''

Phoenix-based RFI, which filed for bankruptcy in 2004, had plans to clean up and develop 3,000 homes on the former Whittaker-Bermite property - 996 acres along Soledad Canyon Road where the weapons manufacturer conducted rocket testing for nearly 50 years until 1987.

But the property requires lengthy decontamination before it can be developed. The chemical perchlorate, used in rockets and known to interfere with thyroid function, has seeped into at least six local water wells. The state Department of Toxic Substances Control is overseeing cleanup.

With RFI's bankruptcy, the Bermite property is up for grabs. Irvine-based SunCal Cos. and North Carolina-based Cherokee Investment Partners are among the bidders, though a sale cannot occur until the bankruptcy is settled.

The 98-page proposed settlement from RFI and its insurers provides about $200 million in cash and insurance to remove toxins. But the city objected last week to a provision that allowed potential buyers to pay less for the property if it agrees to insurance coverage provided in the settlement.

SunCal, which took up the offer, could pay about $17 million for the site. Cherokee would pay an amount that is of ``substantial difference,'' said Deborah Prosser, an attorney for the city. She declined to disclose specifics.

``We want to keep both bidders in the process with an even playing field,'' she said.

But the city withdrew the objection in court Tuesday after persuading RFI insurer AISLIC to re-examine the clause.

Prosser said the city will wait and see before considering further action.

``They're not going to agree in advance to anything specific,'' she said. ``We're just going to see how it plays out.''

Meanwhile, the Castaic Lake Water Agency wants to make sure it receives enough money in the proposed settlement to pay for a $15.3 million perchlorate cleanup. The agency's objections with some of the document's language also has been resolved.

Eugene Tong, [phone]

eugene.tong(at)dailynews.com