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In abandoning its claim on 111 acres of land near Zion, the Lake County Forest Preserve District on Friday cited a lack of funds and the fears of setting an unwise precedent for future expansion.

The Board of Commissioners voted 13-9 to accept a negotiated settlement in a land condemnation suit filed two years ago against Browning-Ferris Industries Inc.

The settlement is the death knell for the district`s authority over Stateline Preserve near Zion because the Forest Preserve District has divested itself of all property there.

In the settlement, Browning-Ferris will keep the disputed 111 acres and pay the district $650,000 that the district says it has incurred in legal and court fees. In addition, Browning-Ferris will buy a 52-acre parcel nearby for an undisclosed price.

That parcel, commonly known as the Bennett farm, has been the target of another condemnation suit by the Forest Preserve District, which promises to drop its claim on the land.

To cap the settlement, the district plans to transfer two parcels totaling 96 acres that make up the Stateline Preserve to Zion.

The city has agreed to maintain those acres as recreational open space in perpetuity. That transaction must still be approved by the Zion City Council. In turning over the property to Zion, Forest Preserve President Andrea S. Moore (R-Libertyville) said she was confident that the district`s original intentions of preserving open space in the area would be met, albeit no longer by the forest preserve.

During a nearly two-hour debate Friday, many commissioners argued that the district should not acquire land to prevent development, especially during a time of financial belt-tightening.

According to Eleanor Rostron (R-Beach Park), the land acquisition budget has only $254,000 that has not been committed to other purchases.

”Are we going then to look at all landfills in the county and condemn land around all of them?” asked Roberta O`Reilly (R-Long Grove). ”Somehow this site has become more special than others in the county.”

The settlement is a bitter pill for Citizens Lobbying for the Environment and Neighborhood, which had collected about 8,000 signatures petitioning the district to buy the property to keep Browning-Ferris from expanding. As a result, the district filed a condemnation suit in December 1990 to buy the property from Browning-Ferris.

If Browning-Ferris expands its landfill operations, it promises to dump no hazardous or toxic wastes at the site and will provide extra protection against groundwater contamination. The company also will provide enhanced landscaping and buffer zones, said spokesman Jim Ambroso.