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Placentia officials, Caltrans reach tentative settlement over failed rail project

November 18, 2009 |  6:45 pm

Placentia officials said Wednesday that they have tentatively agreed to pay $5.5 million to settle a claim by Caltrans that the north Orange County city misspent more than $36 million in state funds to finance a now-defunct rail corridor project.

The dispute involved the $650-million OnTrac project, which was shelved in 2006 after failing to receive federal funding. The proposal, which included sinking 5 miles of railroad tracks into a concrete trench, dragged the city deep into debt and forced officials to cut services and sell park land to recoup their losses.

After almost two years of negotiations, Caltrans agreed to reduce its claim to $5.5 million — a move, city officials say, that spared Placentia from filing for bankruptcy protection.

“It is a great relief that this chapter in the city’s history is about to be closed,” said Mayor Pro Tem Joseph V. Aguirre. “Everyone in the city has been focused on resolving this and the stigma it has left.”

The settlement will be financed by the Orange County Transportation Authority, which agreed to lendthe city about $4.1 million. Placentia will repay the agency from the city’s future share of funds from Measure M, the county sales tax to fund transportation projects. OCTA also will advance the city another $1.4 million in state highway funds.

The City Council approved the settlement this week. Caltrans officials still need to sign the agreement, which was reached with the help of state Sen. Bob Huff (R-Walnut) and then-Assemblyman Mike Duvall (R-Yorba Linda).

Caltrans had alleged that the city owed the state $36,255,632 for a variety of reasons, including poor record keeping, overpaying for right-of-way acquisitions and a lack of supporting documentation for payments to subcontractors.

City officials contended that Caltrans was at least partly to blame because it approved work orders, disbursed state money to the city and neglected its oversight responsibilities. They suggested that the city was more victim than perpetrator.

Councilman Scott Nelson, who participated in the negotiations with the state, said the settlement will improve  Placentia’s finances and credit rating, which had suffered because of Caltrans’ claim.

“If we would’ve had to pay the $36 million, it would have bankrupted the city,” Nelson said.

-- Dan Weikel in Los Angeles and Mike Anton in Orange County