Irvine’s Great Park Fails Transparency Test

JULIE LEOPO, Voice of OC

A sign directs people to the Great Park neighborhoods alongside a construction fence.

The Great Park’s Secretive Taxes

This is Article 2 in a series examining transparency questions around hundreds of millions of extra tax dollars homeowners pay to finance the Great Park.
Article 1: Residents’ Taxes Pay For Great Park Without Their Knowledge
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Homeowners around the Great Park are paying tens of millions per year in extra taxes, yet Irvine city officials rarely tell them where it’s all going.

City officials and partners openly debate where hundreds of millions of dollars in funding has gone, while other project budgets have swelled to five times what was originally conceived, all without public input.

According to projections completed by FivePoint Holdings, the city’s partner in developing the Great Park, homeowners in the park will have paid at least $2 billion in special taxes by the end of the construction.

A grand jury report released in 2015 was highly critical of the Park’s management and transparency over the years, wrapping up its findings with the following.

“From the onset, the Grand Jury found that the City Council and (Orange County Great Park Corporation) were not transparent with either the process or the relevant information associated with the Great Park to the public,” the report said. “There were never definitive budgets, schedules, milestones, or deliverables open for public review.

Developer Control Over the Great Park

The biggest change since the start of the project in 2003 has been the role of the developer FivePoint Holdings, the city’s primary partner in the development of the Orange County Great Park.

Originally, there were two funding sources for the Park—a redevelopment agency and special taxes levied on homes in the Great Park that were managed by FivePoint.

The redevelopment agency was intended to be the primary source, which the city invested $134 million in at 9% interest according to the grand jury report. Projections showed it would generate millions to invest back in the park.

The other mechanism was special taxes levied on homes that would be built in the Great Park through the developer FivePoint, which was licensed to build 3,500 homes and committed $400 million to the Park.

But when former Gov. Jerry Brown dissolved the redevelopment agencies statewide in 2011, it left the city with a massive funding gap to complete the park.

The chosen solution by the city was to increase the number of homes in the park and use the increased tax revenue to make up the difference. FivePoint’s stake of homes increased from 3,500 homes in 2005 to over 9,000 by 2013.

In 2010, the city instituted the first amendment to the development agreement, increasing FivePoint’s zoning allowance to 5,000 homes.

But according to FivePoint CEO Emile Haddad, both the city and the developer knew the number of homes would rise and did not disclose that to the public.

“In 2010, (the city council) knew it would be revisited and that more than 5000 homes would be built. We all knew there would be more homes,” Haddad said. “The city was absolutely incentivizing, and they were the ones pushing for approval. Because without more homes, they would have a major problem within the general fund, because once they built the Great Park, they would never have the money to maintain it.”

However, former councilman Larry Agran said in a telephone interview the city was not endorsing new development in the park and that FivePoint was the one asking for the expansion.

“The city was always receptive to development proposals, that’s been the posture of the city since its founding,” Agran said. “We weren’t spurring it, we weren’t negative on it, we were just listening.”

FivePoint also had a role in the design of the park, and in 2013 requested that their design package be approved by the city, according to a city staff report presented to the council.

The plan laid out the details for the western sector of the park, and it requested anything within its design be considered in line with city standards, and that any “logical evolution” of the package would be considered approved by the city, according to the staff report.

The report said that allowing FivePoint this much control of the park’s operations was “inconsistent with the City’s historic regulatory practices.”

“The decision to approve these requests would allow FivePoint to exercise a level of discretion over the project’s evolution that would otherwise be exercised by the City Council.”

But in 2016, FivePoint publicly stepped back from the design process, when it saw it would be “used politically,” according to Haddad.

“We chose to step back from it and let the city do their thing,” Haddad said. “Once the city comes to a decision on what they want to see built, and the balance of the park, then we will sit down with our partner and see how we can help.”

However, Haddad has said he’d be interested in going back to work on the design of the park in the future.

The Debate over $200 million

In the original deal, FivePoint committed $400 million to the park, half of which would be repaid through special Mello-Roos taxes and the other half would serve as a developer fee, according to city records.

Haddad said he still has no idea where the money from the development fee went.

“I never really looked into where it went. I’m upset it was spent the way it was spent, but it’s not my business to look into where it was spent,” Haddad said.

Haddad has said he has no interest in knowing where the money ended up, despite the fact that it was close to half of FivePoint’s original investment in the park.

“The minute I gave them the money, I view that as not my money. It’s taxpayers’ money,” Haddad said. “Honestly, if the $200 million wouldn’t have been spent the way it was spent, and it was spent to build things, the Great Park would be built today.”

According to Haddad, he would have grounds to potentially sue the city over the misspent $200 million, but is not interested in doing so and currently wants to continue development with the city.

If the decision was made to sue, he said the only money he could likely receive is the money from Irvine’s settlement with the state of California over the collapse of redevelopment, worth $292 million.

According to Agran, the initial $200 million has all been invested into the park, and Haddad knows where the funds went.

“It’s all documented where it went,” Agran said. “If you look at all the audits done over the years, up to this last audit, every single one of them showed not one penny of unauthorized spending.”

Homeowner Understanding

JULIE LEOPO, Voice of OC

A sign advertises model homes for the Great Park Neighborhoods.

When potential homeowners look at homes in the Great Park, there’s a legal form they have to fill out showing that they understand that special taxes are in place on the property.

The form they’re legally required to be shown states the cost specific for the address, as well as the range of potential maximum prices for homes in that area based on square footage.

To see a copy of that form, click here.

The form also says the tax can increase by as much as 2% annually for 40 years after special taxes are put on the home, and can increase by 3% annually every year after that.

The establishment documents for the Great Park’s special districts state the cost will increase by 2% annually automatically.

The language in the disclosure also lists what that money can be spent on, including various infrastructure improvements and, “Bond related expenses, administrative fees, and reimbursement of costs related to the formation of the (special tax district),” as well as “costs of services related to the infrastructure and public facilities that are constructed within the district.”

No further explanation or definition of those terms is given to homeowners in the form.

No notification is sent from the city of Irvine to homeowners when new projects are approved or when new special tax districts are approved according to city staff.

The Orange County Great Park Board

Another major shift over the life of the park has been the makeup of the Orange County Great Park Board, the organization in charge of managing the OC Great Park Corporation.

Originally, the OC Great Park Corporation was set up as a nine-member executive board, with the members of the city council and four at large members that controlled operations. The board was officially separate from city oversight.

But after the 2012 elections, a new council majority made some major structural changes to the leadership of the park.

In 2013, a 3-2 vote by the City Council reconstituted the Great Park Board as an advisory body to the city. It also removed the at large members of the board, leaving only the city councilmembers with a vote. The OC Great Park Corporation now operates under the city manager’s office supervision.

JULIE LEOPO, Voice of OC

The Irvine City Council at a February 2020 meeting. The Great Park Board is now comprised of the same five members as the Irvine City Council.

Currently, the Great Park Board meets once every month on Tuesdays at 2:00 and votes on items related to the Great Park to recommend actions to the council.

Just hours later, those items are incorporated as part of the city council’s 4:00 meeting under the consent calendar, which means they aren’t publicly discussed at the council’s meeting unless a councilmember requests it.

The Board’s meetings are open to the public, but due to their timing during the workday, see a far lower turnout from the community than the council’s meetings.

Public Estimates Shift Throughout the Years

The final cost of the Great Park has remained fluid throughout its development.

The original estimated budget for the Great Park announced in a 2003 city press release was set to cost $350 million initially according to the grand jury report.

Six years later in 2009, the Great Park Board approved a submission from the design studio for a partial park design that city staff estimated would cost $1.4 billion to complete.

Because development of the park was always intended to be developed over several decades, no overall budget for the final park exists.

“No project of this magnitude is all pre-funded. It’s not like we have a vault where we have a half billion or a billion stored for the development and operation of the Great Park pre stored. No, you make arrangements to fund it as you go,” Agran said.

The grand jury report also cited a 2003 planning report prepared by the city that said “the Orange County Great Park development strategy…will enable all key elements of the Great Park to be developed within five to seven years of the sale of the property.”

Agran said any report claiming the park would be completed within ten years was false and the city never made that claim.

“Any interpretation that there would be a fully developed great metropolitan park in 6-7 years just totally misunderstands the process and the expectation,” Agran said. “They never heard it from me or anyone else in a position of responsibility. You look at any of these parks, 50-100 years, we believed ours could be built in 40-50 and that’s what redevelopment was based on.”

Aquatics Center goes from $50 million to $250 million

The city also did not disclose many of the specifics of the new aquatics center that will be the home of USA Water Polo in the Great Park.

While public access has been promised, no specifics have been confirmed.

When the plan was approved by the city council in 2018, FivePoint CEO Haddad spoke at the meeting, describing the aquatics center as a “win for the city,” and stating the center would not come at any cost to the city.

The aquatics center will not cost any city funds, but it will come from tax dollars collected from Great Park residents, who have no control over how those taxes are spent, levied, and are not notified by the city when new projects are approved or debated by the council.

According to emails between city staff and USA Water Polo obtained by Voice of OC, there was a preliminary proposal in November 2017 to establish a new home for the Olympic team in the park for just $50 million, half of which would be paid for by USA Water Polo. The deal got as far as a preliminary draft, but was never shown to the public.

The exact details of how the new home for the water polo team went from $50 million to over five times that in less than two years are still unknown.

Instead of just an aquatics center, the new plan calls for “a state-of-the-art Olympic-class water polo and indoor volleyball/basketball facilities, and a supporting parking structure,” almost all of which will be paid for with special taxes from Great Park residents.

USA Water Polo’s investment also dropped, going from $25 million to a pledge of $10 million for the new center.

According to those emails, which span the last two years, there was no mention of involvement with the aquatics center from FivePoint until Sept. 2018.

The idea of where an aquatics center originated is also unknown. Chris Ramsey, CEO of USA Water Polo, says that the team has been talking with the city since 2007, while Mayor Christina Shea said that talks began sometime in the last two to three years.

The homeowners paying for the new aquatics center also already have access to four other private pools throughout the Great Park Neighborhoods.

Councilwoman Farrah Khan, chair of the Great Park Board, said she had had no idea when the talks started on the project. While the deal’s existence was shared as early as Jan. 2019, it was not discussed at the Board’s meetings the entire year leading up to the Oct. 22 vote.

FivePoint was asked to return with a design plan and refined cost projections by the end of March at the meeting where the project was approved to move forward, but the exact date has not been scheduled yet.

Noah Biesiada is a Voice of OC Reporting Fellow. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.