COMMITTEE SCALES BACK NEWHALL PLAN : PROPOSAL MEANT TO HALT LITIGATION.

Byline: Patricia Farrell Aidem Daily News Staff Writer

The boundaries of a proposed redevelopment zone in Newhall's beleaguered downtown would be cut by about one-third under a recommendation designed to stave off new legal challenges from the Castaic Lake Water Agency.

A citizen committee formed to help plan the facelift for the Santa Clarita Valley's original business district has cut the size of the area under study for redevelopment from 1,350 acres to 897 acres, city spokeswoman Gail Ortiz said Thursday.

The plan was drafted Wednesday night and will be presented to the city Planning Commission on Tuesday and the City Council will review it a week later.

Eliminated from the study area were some shopping centers along the south side Lyons Avenue, commercial properties on the north side of Lyons east of the Golden State Freeway (5) and residential areas along both side of Wiley Canyon Road south of Lyons, Ortiz said.

Also removed from the scaled back redevelopment zone were the Circle J Ranch development and the southern end of Pine Street in Newhall.

``They don't want any legal contention from the CLWA,'' Ortiz said.

``They want this to go through with no glitches.''

Castaic General Manager Robert Sagehorn was not in his office Thursday and other agency officials did not return calls.

The Castaic agency, which manages state water for local suppliers, successfully challenged Santa Clarita a year ago over its $1.1 billion citywide redevelopment/quake recovery zone.

The water agency opposed the massive district because it stood to lose a portion of property tax revenue from the target area.

The city came back with the smaller $12 million redevelopment area, but anticipated further legal action after a Feb. 6 agency public meeting in which reports by hired consultants critiqued the city plan.

The consultants' study indicated water rates could increase if a redevelopment zone were established.

Under state law, municipalities may designate redevelopment zones that allow them to keep increases in property tax revenue that result from new construction, inflation or property changing owners.

Without the redevelopment designation, the increase in tax revenue would have gone to other jurisdictions, such as Los Angeles County or the water agency.

In drafting its redevelopment proposals, city officials looked at economic data from the target zone, noting that property values in downtown Newhall are stagnant and vacancy rates are rising, said Glen Adamick, an economic development associate with the city.

``We have some areas that are in the gray area,'' Adamick said of the portions removed from the proposed zone.

``There's some evidence that there are blighted properties in those areas, but some of them were marginal as to whether they would qualify as a whole as blight.''

The law does allow redevelopment zones to include some nonblight areas to provide property tax money to fund improvements. Thus the city's plan includes some thriving properties.

``There are parts of Newhall that are really nice because there are people who make them that way,'' Ortiz said. ``But there are parts of Newhall that need a facelift and you're in Lala Land if you can't see that.''

Assistant City Manager Ken Pulskamp said the city is opting for a more conservative approach in drafting the boundaries and interpretting the definition of blight.

``We have a lot of community support, and we don't want to get embroiled in anything that will slow this down too much,'' Pulskamp said. ``It's mu desire that the redevelopment area we come up with is one that the city and Castaic Lake both feel comfortable with.''

Agency officials, he said, have seen the new plan, but did not indicate a stand.