The toxic contamination under the old Curtis Park railyard has proved so widespread and expensive to dig up that developer Paul Petrovich now proposes to bury much of it on site rather than ship it away.

After buying the railyard in 2003, Petrovich said he would clean up the entire 72 acres so thoroughly it would be suitable for single-family homes.

His commitment cheered residents in the adjacent neighborhoods of Curtis Park and Land Park. The property's previous owner, Union Pacific, had long resisted scrubbing the property to residential levels.

But the discovery of additional arsenic and lead-tainted dirt in the railyard has made his promise prohibitively expensive to keep, Petrovich said.

Petrovich said he has spent $24 million thus far on the cleanup. The total could rise to $42 million if all the dirt had to be hauled off to Utah in rail cars, he said. Much of that would be covered by insurance, but there is a cap on the amount the insurer will pay, Petrovich said.

In 2003 when UP sold the railyard, Petrovich estimated that the cleanup would cost about $10 million.

"This year we went out and tested, and it just kept getting dirtier and dirtier," he said.

Mounds of tainted dirt waiting to be put somewhere now dot the site, a long rectangle of land that stretches north from Sutterville Road.

Petrovich has asked state regulators to allow him to move some of the contaminated dirt out of the area planned for housing and put it under the section of the property slated for commercial use. The arsenic and lead-laden dirt would then be capped with pavement, clean dirt or building foundations.

All of the area slated for residential development would still be cleaned up to the residential standard.

Such an approach is not unusual, Petrovich noted. It is being used by the developers of the downtown railyard, who plan to pile up contaminated soil and cover it with a park.

Petrovich's plan to keep some of the dirt on the railyard property must be approved by the state Department of Toxic Substances Control.

"We've had some discussions, but we haven't had a formal proposal," said DTSC spokeswoman Carol Northrup. She said the agency has asked Petrovich "for some additional data."

Documents released by the agency show that it is pressing Petrovich to cap the contaminated dirt with a park – where it would be easier to inspect than under commercial buildings. Any change to the railyard cleanup plan would require an amendment and public review, Northrup said.

Petrovich has rejiggered other aspects of his plan for the railyard to make it more financially viable in a difficult market.

Original plans submitted to the city called for 210 single-family homes on the northern half of the site. The southern portion would have contained 310 multifamily units, a grocery store, other retailers and a district that combined ground level offices and stores with housing on top.

Earlier this year, Petrovich told the Sierra Curtis Neighborhood Association he was planning to eliminate the multi-family housing from his plan. The reason: It was too expensive to meet the city's requirement that 15 percent of housing units in the railyard be affordable to low-income and very-low-income residents.

The association objected. Petrovich put 200 multifamily housing units back into the plan and took out a proposed hotel.

After negotiations with the Sacramento Housing and Redevelopment Agency, the developer won a tentative OK to meet his affordable housing requirement by dedicating land in the railyard for an 80-unit senior development.

Normally, the agency requires developers in the city to build affordable housing themselves. But the Curtis Park site is "a very expensive development, and we're sensitive to that," said Christine Weichert, assistant director of housing and community development.

The commercial district now includes a movie theater where patrons could eat dinner and sip drinks while watching first-run films.

The number of single-family units has been reduced to 178. Petrovich said construction of the mixed-use district will depend on the market.

Dan Murphy, president of the Sierra Curtis Neighborhood Association, said the group is happy that Petrovich put the affordable housing back in the plan. But it remains concerned about the amount of commercial development in the section just north of Sutterville Road.

"We've consistently thought there was too much commercial that would to add to the traffic on roadways that weren't designed to handle it," he said.

Call The Bee's Mary Lynne Vellinga, (916) 321-1094.