Behind Irvine’s $2.2 Billion Fight for the Great Park’s Future

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Part one of a two-part look at the financial realities facing the Great Park. Read part two here.

 

When Gov. Jerry Brown axed redevelopment agencies last year in order to balance the budget, he threw a wrench into the building plans and budgets of cities up and down the state.

But probably no city stands to lose more from the state’s move than the city of Irvine, which had counted on its redevelopment agency to put it in the pantheon of cities with world-renowned parks.

It was clear from the beginning that the Orange County Great Park would take a huge hit; $1.4 billion over 40 years is the number that has been cited for the past several months. But look closer and the amount of lost revenue goes much higher — more than $2.2 billion.

Here’s how it breaks down:

The state Department of Finance’s decision last month involved two funding streams. The $1.4 billion would flow to the city from increased property taxes over a period of 40 years as thousands of homes are built around the park through a development agreement with Heritage Fields El Toro. But when Brown ended redevelopment, he essentially diverted that stream away from Irvine and to Sacramento.

Irvine leaders have sued for the $1.4 billion, arguing that the state can’t take the money because the city’s agreement with the developer is an “enforceable obligation” agreed to before redevelopment was axed and requires the city to build the park.

If that battle is not enough, the city is also fighting on another front.

While most of the attention has been paid to the $1.4 billion, the state is also laying claim to at least a portion of another $812.9 million in revenue that the city was counting on for the park. This money was scheduled to come via a 2007 financing deal between the city and its redevelopment agency.

Under the terms of the deal, the city sold 35 acres of land to the redevelopment agency for $134 million at 9 percent interest. Amortize that debt over 40 years and you get $812.9 million that was to go into the park’s unrestricted fund, which pays for operations and maintenance.

The city may soon be filing a second lawsuit in an attempt to restore this funding stream.

This week city officials took what they say are important steps to bolster their legal argument under the next potential lawsuit. A provision under the dissolution bill allows cities to re-enter into agreements like the 2007 financing deal, city officials argue. City Council and a redevelopment agency successor entity oversight board this week re-approved the financing deal so the city can resubmit its revenue claim to the state.

But so far, the Department of Finance doesn’t agree with that position, according to Dan Slater, counsel to the redevelopment agency’s successor entity. This means that the state will likely reject the claim, setting the stage for the next lawsuit.

While the park’s prospects might look dim, city officials have remained optimistic that things will work out. They point out, for example, that the state did not deny the entire $812.9 million but only $2.8 million, which is the revenue claimed to repay the debt through December. But the state’s decision on the initial payments is probably a good way to predict future decisions on the revenue stream.

“The $1.4 billion is not lost,” Assistant City Attorney Jeff Melching said last week. “It’s the subject of ongoing litigation.”

Despite their optimism, city officials have made several cuts to the park budget after redevelopment ended. For example, the compensation for the park’s controversial public relations firm Forde & Mollrich, was cut from $100,000 to $50,000 per month.

— ADAM ELMAHREK

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