Two long-awaited investigative reports on Irvine’s Great Park were released Monday, with each attempting to explain different aspects of why the county’s largest-ever public works project went awry.
One report — by the Newport Beach-based accounting firm of Hagen, Streiff, Newton & Oshiro (HSNO) — focuses on the numbers behind the project, and, along with the other report, alleges that former City Council leader Larry Agran knowingly lowballed the cost of the project by more than a half billion dollars.
The other report — by the Irvine-based law firm Aleshire & Wynder — sets out to explain why after $350 million spent, only 88 acres of the 1,347-acre park was built.
That report’s narrative begins with a “fictitious statement” made by Agran – the leader of the Democratic faction that for years controlled the park – at a Great Park board meeting in 2006.
In his statement, Agran says that the entire project, including a canyon with its own microclimates, could be built for $401 million. However, he acknowledged in a deposition last week that he was told months before that the project would cost $1 billion.
The project unraveled as city leaders commissioned a design without any budget constraints, with total estimates for park construction reaching as high as $4 billion, a dollar figure that park leaders could have never achieved, according to the report.
Meanwhile, Agran exerted such intense political pressure and overstepped his authority in a way that rendered management of the park project dysfunctional at every level, leading to ballooning costs, consulting contracts that couldn’t be enforced, and budgets that spun out of control, according to the report.
(Here are links to the report documents: Aleshire & Wynder Report, HSNO Report, Final Report Exhibits)
Here is a rundown of the main points in the Aleshire & Wynder report:
- Agran and other park defenders blame the Great Recession and the loss of redevelopment funding for why the grandiose elements in the park’s master plan — such as a man-made canyon — never materialized. But in 2009, redevelopment funding was projected to have at best provided $64 million for construction over a 10-year period, and therefore the plans were never buildable.
- Although city leaders had always said redevelopment would provide $1.4 billion for the project, the reality was that much of the funding would have to pay back a $134 million loan between the city and its redevelopment agency, and housing set asides. As a result, the park was billions of dollars short of being able to achieve its increasingly expensive master plan, and a disproportionate amount was spent on design.
- “The master plan was not killed by the recession or the loss of the redevelopment funding, it was killed by its own hubris,” the report states, adding later on that the park project was “riddled with magnificent, yet financially infeasible ideas.”
- Management of the project was dysfunctional on every level. Agran, who was also former park board chairman, interjected himself into administration of the park, breaking down the management firewall built into the council-manager form of government.
- Because of Agran stepping over the line, his political weight and his desire to leave behind a “legacy project,” staff didn’t have the ability to push back. “Is it a wonder that, as the budgets rose from $401 million to $1.24 billion to $1.6 billion, why critical questions were not asked? Clearly, under the political circumstances, project management was not able to do its job,” the report states.
- City staff couldn’t manage the project because consultants with “strong connections” to Agran – Yehudi Gaffen of Gafcon and Arnold Forde of Forde & Mollrich — took over management roles for themselves. Virtually every staff member deposed for the audit, and park board members, were opposed to the Gaffen, Forde and Agran “coalition.”
- Park CEO Mike Ellzey is credited with showing “courage” and bringing the project under some measure of realistic budgeting. In 2009, he created a business plan and undertook a $70 million development plan that is the extent of what exists at the park today.
- City contracting requirements were “not followed consistently.” One-third of the contracts over $100,000 were not competitively bid, and there wasn’t a consistent record for justifying sole-source contracts.
- The Great Park Design Studio, a joint venture of Gafcon and master planner Ken Smith, failed to deliver an adequate management plan laying out a work schedule, a “key contractual failure.” Yet city officials also failed to enforce contract requirements.
- Ellzey and other park managers believed the Design Studio’s work on feasibility studies and the park’s schematic design to be subpar and behind schedule. But managers believed they couldn’t enforce the Design Studio’s contractual obligations because of the political pressure.
- Change orders were out of control. A contract for construction of the preview park, which includes the iconic orange balloon, started at $1.75 million and grew to $7.7 million.
- Forde & Mollrich had a public relations contract that ballooned from $50,000 per-month to $100,000 per-month and then halved again with no clear justifications.
- The Design Studio and Forde & Mollrich didn’t disclosue potential conflicts of interest, such as work by Gafcon on the home of a principal of the public relations firm, that resulted in the payment of over $4 million that should have been withheld pending investigation.
The city could recoup funds in lawsuits filed under contract claims, the False Claims Act, and “professional negligence,” according to the report. Potential lawsuit targets include Gafcon and Forde & Mollrich over the conflict of interest on the home remodel.
The report indicates other lawsuits could be filed over Agran recruiting political ally George Urch as a subconsultant, and a contract cancellation agreement with the Design Studio that was never approved by council.
Despite depositions from city officials regarding Gafcon, the audit report itself makes no specific “finding” that the consultant did poor quality work. This is because there is conflicting testimony, with Gafcon obtaining a declaration from an employee of a subconsultant countering the claims of city officials.
Gafcon has pushed back more than any other consultant, filing a complaint with the state Board of Accountancy regarding HSNO, releasing a video rebutting claims of a preliminary audit, and lobbying the state’s legislative audit committee to launch an audit of the audit.
In an interview late Monday night, Agran continued to write off the findings of both reports as the results of a political smear campaign.
He refuted Aleshire & Wynder’s claim that the redevelopment financing plan would have fallen drastically short of paying for the project, saying that if they are relying on HSNO’s numbers, they can’t be trusted, and pointing to errors made in a preliminary report released last year.
“I wouldn’t buy it for a minute if its coming from these guys. Fact of the matter is I trust my own instincts and my own math,” Agran said. “These are guys who can’t add two and two.”
He also took issue with the claim that, in addition to a fatally flawed financing plan, the design process had no construction budget to go by. While the $401 million was an initial figure for the long-term park plan, that number grew as the vision unfolded, and there were always new budgets to go along with new ideas, he said.
“As it turns out, people had a bigger dream… that was more than just athletic fields,” Agran said. “So as the vision grew, the plans grew, and of course the more you do, the more it costs.”
Among other things, Agran said that the HSNO report couldn’t identify a single instance in which he had unilaterally made a decision that violated the council-manager form of government.
However, in the Aleshire & Wynder report, it says Agran asked for things like restrooms, a farm, shaded areas, benches, the park balloon and carousel.
Agran also asserted that HSNO is under investigation by the California Board of Accountancy after Gafcon filed a complaint. He said that HSNO goes out of its way to say its not an audit — a “cover your ass statement” — because the firm is trying to save its license from being revoked.
He dismissed findings that he misled the public, again railing against HSNO.
“You’re saying this that or the other, this is coming from guys who say we don’t know where $38 million went… and now they’re going back 10 years,” Agran said, citing a finding in the HSNO preliminary report that questioned the fate of $38 million after auditors claimed they couldn’t get an answer from city staff.
The money was ultimately deemed to have been found and properly handled.
Agran also dismissed reports that the Orange County district attorney’s office is investigating, and asserted that council members are not going to decide to sue former consultants the report claims could be liable using what he said were baseless legal claims.
“I know the district attorney’s office generally speaking is thoughtful, and they’re not going to be pursuing cases where none exist,” Agran said.
The City Council is expected to discuss the findings of the report at its Tuesday night meeting and decide whether to obtain a court order forcing Agran to answer the questions he refused to answer in his deposition.
Agran faced questions about whether park consultants also volunteered for his campaign, but he refused, citing First Amendment privileges to keep his associations confidential. The law firm is trying to figure out whether there is merit to allegations that park consultants who helped Agran’s campaign received inflated park contracts in exchange.
Please contact Adam Elmahrek directly at aelmahrek@voiceofoc.org and follow him on Twitter: @adamelmahrek