COUNCIL: OWNERS IN DEFAULT IF AGREEMENT IS VOID, WORK ON HOMES COULD PROCEED.

Byline: Heather MacDonald Staff Writer

SANTA CLARITA - The City Council likely will find that the current owners of the defunct Bermite explosives factory failed to meet the terms of a 1995 development agreement, which would allow for construction of 2,911 homes in the center of Santa Clarita.

However, the city staff is recommending that the council on Tuesday stop short of terminating the agreement, which could complicate the continued operation of the Santa Clarita Metrolink Station.

``That may be an option at a later date, but there are so many ramifications to that decision that we need to proceed carefully,'' said Senior Planner Lisa Hardy.

Phoenix-based Remediation Financial Inc., which bought the site in 1999, had hoped to develop the former munitions factory into the Porta Bella subdivision, complete with homes, businesses and a center-city road network.

But the company's plan fell apart in 2001 when the City Council refused to allow the property to be developed in phases, as each section was certified as clean by state officials. Soon after, the firm's local development company ran out of money, work stopped and RFI put the 996-acre site up for sale.

Earlier this year, the city Planning Commission found that RFI had failed in four areas. RFI refused to provide any evidence of good faith compliance with the development agreement, refused to provide insurance protection to the city, failed to meet the terms of its clean-up agreement with the state Department of Toxic Substances Control and improperly attempted to terminate the city's right to use and occupy the Metrolink station.

After the council's decision, RFI will have 120 days to correct the deficiencies, but city officials do not expect that to happen, as attention has shifted to Whittaker Corp., the company that sold RFI the property, and Cherokee Investment Partners, a potential buyer of the site.

``In four months, it's likely to be a whole new ballgame,'' Hardy said. ``RFI has one foot out the door.''

Cherokee, a Raleigh, N.C.,-based real estate investment firm, is considering whether to finalize its purchase of the site and has met with both Santa Clarita and DTSC officials. Cherokee, one of the nation's most experienced brown-field remediation companies, is expected to conclude its due-diligence investigation in March.

RFI representatives plan to urge the City Council not to follow the staff recommendation and continue the matter because a finding of noncompliance could complicate the sale of the property to Cherokee.

``It will certainly increase the buyer's uncertainty about the site, and hurt the council's ultimate goal, which is to get the site cleaned up as quickly as possible,'' Brown said.

Cherokee managing director Dwight Stenseth agreed with Brown.

``It will complicate things,'' Stenseth said. ``But we're not far enough along in our due diligence to understand what the impact will be.''

Planning Director Jeff Lambert and other officials have told the City Council that the city's best chance of cleaning up the property and stemming the pollution of the Saugus Aquifer hinges on a quick sale of the site to a company with the resources and motivation to clean and develop the site, such as Cherokee.

City officials do not believe Whittaker will willingly clean up the property to a high enough standard as to allow it to be redeveloped. Whittaker ceased operations on the property nearly 20 years ago.