The Los Angeles County Transportation Commission voted this month to build an elevated rail line rather than a subway through much of the San Fernando Valley, capping a three-year battle over which option to choose.

Valley residents and commercial interests debated intensely over which option made the most sense for their neighborhoods. In the end, the less expensive proposal won out in the commissioners' 6-to-3 decision.

The elevated rail line, planned along the Ventura Freeway, will cost an estimated $2.59 billion. The subway which would run parallel to Burbank and Chandler boulevards, would have cost an estimated $3.03 billion. Some commission officials noted that the $440 million difference could make a huge dent in funding another line in the proposed countywide rail network.

A subway line is under construction that begins in downtown Los Angeles and eventually angles northwest toward the valley. Work on the elevated rail line. which will connect with that subway, is scheduled to get under way in about five years.

About 48% of voters supported an elevated rail line through the valley in an advisory referendum in 1990, compared to 10% favoring a subway, 20% for no rail, and 21% for a light-rail line in a shallow channel.

Citizens groups that opposed the elevated line vowed to try reversing the commission's decision.

State and local funds would help fund the line, including county sales taxes and state bond proceeds.

A California appellate court last week denied a petition for rehearing of a decision striking down the enforceability of a mortgage-forgiveness rider.

The affected home owners, Michael and Bonnie Benov, plan to petition the California Supreme Court for review, said Mark Mosley of O'Melveny & Myers, who represents the couple.

Last month, the First Appellate District of the California Court of Appeal overturned a lower court decision and found that mortgages funded by tax-exempt bonds need not be forgiven if they are sold by the trustee before the bonds are redeemed. The mortgage forgiveness rider at the heart of the case resembles those appearing in other bond transactions.

Market participants are concerned that the ruling could cast a shadow over the enforceability of such riders, which were developed to assist issuers in coping with federal limitations on expected mortgage yields relative to yields on accompanying tax-exempt bonds.

The Benovs asked for an appellate rehearing on grounds that the ruling relied on misstated facts tied to the handling of their mortgage.

A petition for high court review must be flied by Tuesday, Mosley said.

A small special tax financing in Yolo County recently received the highest rating, an Al. currently assigned by Moody's Investors Service to such deals. The deals are commonly known as Mello-Roos bonds.

Moody's said in a statement that "the extensive amount of existing development within the district generates sufficient tax revenues to provide a favorable 2.28 times coverage of peak debt service requirements."

Proceeds from the special tax bonds sold by Yolo County Community Facilities District No. 1989-1 will help fund expansion of a library branch in Davis, about 15 miles west of Sacramento.

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