PROPOSED BERMITE PACT HITS OPPOSITION CITY OFFICIALS OBJECT TO TERMS OF SETTLEMENT.

Byline: Eugene Tong Staff Writer

SANTA CLARITA - City officials object to a proposed settlement in the Whittaker-Bermite bankruptcy case, arguing it gives too much power to the defunct firm's insurers over the future clean-up and development of its contaminated - but valuable - property.

Attorneys representing the city filed the objection Monday with the U.S. Bankruptcy Court in Arizona, in anticipation of a Dec. 20 settlement hearing where the judge could approve the deal.

The 98-page proposal from Whittaker's current owner Remedial Financial Inc. of Arizona and its insurers provides about $200 million in cash and insurance to remove toxins left from decades of weapons testing and manufacturing.

It also would allow development at the 996-acre property along Soledad Canyon Road, in the heart of Santa Clarita.

The state Department of Toxic Substances Control is overseeing the clean-up.

Eric Lardiere, Whittaker's general counsel, said the settlement as the best deal for all parties.

``The settlement is in the best interest of the city of Santa Clarita,'' he said. ``The settlement provides complete funding for clean-up of the property as well as the settlement of the local water agencies' lawsuits. Funding is provided with substantial cash deposited into escrow, as well as in the case of buying the site, an opportunity for the buyer to be insured under a very valuable insurance policy being provided by Whittaker.

``It's more than a good deal - it's an outstanding deal.''

But Deborah Prosser, the city's attorney in the case, contends the insurance coverage provision, which reduces the amount a buyer would pay for the property, is inherently unfair. Irvine-based builder SunCal Cos. and North Carolina-based Cherokee Investment Partners are eyeing the property.

``The settlement agreement doesn't actually select the successful bidders,'' she said. ``(If) one has to come up with $17 million and the other comes up with $50 million, it's not because the court told them to do it. It's because the insurance company told them to do it.

``We want to make sure there is a fair playing field.''

Lardiere said the bidder can decline the insurance.

``If the bidder does not wish to become an insured under Whittaker's insurance, that is the bidder's decision,'' he said. ``The settlement does not require a bidder to become insured under the policy.

``What this settlement does is it enables big legitimate companies like SunCal and Cherokee that they will have the funding to clean-up this property.''

City Attorney Carl Newton said city officials also wants to see the Whittaker property decontaminated and developed, but they want it done correctly.

``The bidders (should) have a level playing field and an equal opportunity to bid on the project,'' he said. ``The city's interest is in having a buyer that will effectively remediate the property of all the contamination at the earliest possible time.''

Groundwater contamination has been linked to the Whittaker site, where rocket testing occurred for nearly 50 years until 1987.

Chemicals such as perchlorate - a salt used in weapons manufacturing that is known to interfere with thyroid function - have contaminated at least six water wells. Cleanup at one wells began last month, while local water agencies led by the Castaic Lake Water Agency sued to get a piece of the settlement to pay for the rest of the $15.3 million decontamination plan.

CLWA attorney Fred Fudacz said ``technical problems'' exist in the settlement language, but more important is whether funds are available for the water agency to complete groundwater clean-up.