REDEVELOPMENT CASE SETTLED BY CITY, AGENCY.

Byline: Sherry Joe Crosby Daily News Staff Writer

After offering rival settlements, the city and Castaic Lake Water Agency forged an agreement Wednesday that allows the city to pursue a smaller redevelopment agency while preserving key elements of earlier proposals.

In a 19-page settlement approved by Los Angeles County Superior Court Judge David A. Horowitz, both sides agreed to end two lawsuits brought against the plan by the water agency.

The agreement terminates the city's proposed $1.1 billion redevelopment plan, but allows a traditional redevelopment plan that focuses on earthquake and blight repairs in such communities as Newhall and Canyon Country.

The slimmed-down settlement also eliminates 13 accusations against the city and calls for both agencies to pay their own attorneys' fees.

Outside the courtroom Wednesday, Castaic Lake attorneys celebrated their two-year battle against the city's redevelopment and earthquake recovery plan.

"This plan is invalidated," said R. Bruce Tepper, a Castaic Lake attorney. "This brings to an end one of the grossest violations of redevelopment law within the last 10 years."

Wednesday's settlement mirrors one approved last week by the Castaic Lake board but rejected by the City Council. Santa Clarita officials said they settled out of desperation to start long-delayed redevelopment plans.

"We saw problems in continuing litigation," said City Attorney Carl Newton, noting the two unresolved lawsuits. "That means litigation for years and the uncertainty of pursuing redevelopment. This (agreement) leaves the city to pursue traditional redevelopment."

Castaic Lake sued the city in February 1994, charging that Santa Clarita's redevelopment agency attempted to unlawfully exempt nondisaster-related improvements from environmental law. The water agency stood to lose more than $100 million in property tax revenue if the city prevailed.

The 30-year plan would have used a portion of property taxes to finance many improvements throughout the city, which suffered $144 million in private property damage. The plan encompassed 18,651 miles of roads and included refurbishing downtown Newhall, improving streets, storm drains and building a system of bicycle and hiking trails.

In December, a state appellate court ruled that the city violated state environmental law and must prepare an environmental impact report for its plan, formed after the Jan. 17, 1994, Northridge Quake. The city had appealed that decision to the state Supreme Court.

The second lawsuit focused on legal procedures allegedly violated by the city. Last month, Judge Horowitz issued a preliminary ruling against the city and was prepared to start a nonjury trial Wednesday.

Councilwoman Jo Anne Darcy, who once staunchly defended the city's redevelopment agency against attacks from Castaic Lake, said she had changed her mind.

"When you look at it in retrospect, it was too large," she said of the plan. "But the city needed it to be that large because it was a long-range plan that would look at all the damaged areas in Santa Clarita."

Other council members said they are pleased with the settlement and looked forward to redeveloping areas of Santa Clarita.

"We can now put all that behind us and start fresh," Councilman George Pederson said. "With community direction and community support, we can plan an agency that will not cause anybody any anxiety."

Added Councilman Clyde Smyth: "I'm glad it's over. It's been going on a an awful long time. It's time to bring it to a close."

Last week, both sides approved written agreements that ultimately failed because the city fought the inclusion of Castaic Lake's interpretation of Judge Horowitz's preliminary ruling against the city in one of the lawsuits.

"We feel it kept all the open sores there," Pederson said. "Now I feel it was a clean deal all the way."

Castaic Lake officials urged the inclusion of the proviso to prevent the city from resurrecting its monolithic disaster plan. The settlement includes the judge's tentative ruling but omits Castaic Lake's interpretation of that ruling.

"We feel there's enough assurance that it will protect us from the city enacting a similar oversized plan," Cooper said.

And like its predecessors, the settlement requires both sides to pay their attorneys' fees. The city spent $300,000 fighting both cases, Newton said while the water agency spent about $1 million.

TERMS OF THE AGREEMENT

OUTCOME: The settlement negates the city's proposed $1.1 billion redevelopment-quake recovery agency, but allows the city to create a scaled-down plan.

LEGAL FEES: Both sides will pay their own legal fees.

OTHER ACTIONS: The settlement ends two related lawsuits brought by the Castaic Lake Water Agency against the city.

PAST RULING: Reference to a tentative court ruling against the city in one lawsuit is incorporated in the settlement, prohibiting Santa Clarita from re-introducing the plan.

CAPTION(S):

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Box TERMS OF THE AGREEMENT (see text)