Irvine leaders are set to discuss a new plan for paying for the city’s Great Park, the city’s crown jewel that’s slated to receive over $1 billion from taxpayers in the next decade.
While the new deal removes most of development partner FivePoint Holding’s control over the park, it also opens up hundreds of millions of taxpayer dollars for the city to spend on park projects at will.
There are also questions around what will happen under the new plan if FivePoint can’t complete its required work as the company’s stock price continues to fall.
The taxes that fund most of the park’s development come from the residents who live around the park, who pay a special Mello-Roos property tax that funds their neighborhood’s construction.
City staff project the total revenue from those taxes and any bonds issued from those taxes at over $1.2 billion by 2030. The city would receive $625 million for their goals, while FivePoint would receive $600 million for their end of the deal.
Under the current system, those funds were limited to a very specific list of approved uses, allowing for construction of streets, sewers and other necessary infrastructure at the park.
Now, city leaders are talking about opening up those funds so they can be spent on any park project in the city’s framework plan, including proposals like a recently approved amphitheater, a botanical garden, a lake and more.
[Read: Irvine City Council Moves Ahead With Publicly Financed Great Park Amphitheater]
The only requirements the city has to meet before spending on those projects is showing that it can pay for the existing maintenance fees at the park according to the staff report.
City manager Oliver Chi says expanding what the money can be spent on is the only realistic way to get the promised park built.
“The updated agreement puts us in a better position to decide what we want in the Great Park, but also to access the existing money that’s being generated,” Chi said in a Friday phone interview.
He also said if the development agreement isn’t expanded to let the city spend on its bigger projects “the city doesn’t have the ability to develop the park.”
FivePoint did not respond to requests for comment on this article.
The city’s discussion on the plan will start at 3 p.m. Tuesday, and can be viewed here.
While residents’ special taxes will remain the same under the new plan, the city is also removing the $1.6 billion cap placed for bond debt under the old development plan and isn’t setting a new limit, saying they’ll be able to spend as long as the special taxes can pay for the bonds.
“As long as the debt market says there’s enough resources to pay for the loan, we’ll be able to access those credit facilities,” Chi said.
The new program also removes nearly all of FivePoint’s control in the park’s development, but it also opens new questions on how much public money the developer will walk away with.
FivePoint’s role in the park’s construction dramatically increased in 2011 after Gov. Jerry Brown shut down city redevelopment agencies throughout the state, which was the primary vehicle funding the park’s construction.
FivePoint agreed to step in and helped set up the special tax districts in the park, but they got a lot of power in deciding what projects could be put in the park without much input from the residents who were footing the bill.
[Read: The Great Park Tax: How Irvine Homeowners are Paying for the City’s Big Dreams]
City staff also said in the staff report the current agreements between the city and the developer have made Irvine “dependent on, and in some respects subordinate to, (FivePoint).”
While city leaders initially praised the public private partnership they constructed with FivePoint, the deal began to sour in 2020 after the developer put multiple projects on ice indefinitely without speaking to city leaders and refused to publicly meet with them.
[Read: City of Irvine and Great Park Developer Once Close, Now At Odds]
Last year, FivePoint CEO Emile Haddad stepped down and was replaced by former Irvine Company executive Dan Hedigan, and many of the company’s other executives left over the next few months.
The company’s stock value has also dramatically decreased in the last four years, from just under $15 a share in 2018 to around $2.50 a share on Thursday last week.
The company’s net revenue is down 35% compared to last year, and the company’s net cash on hand dropped 1200% during that same span of time according to the company’s June quarterly report.
Under the new arrangement, FivePoint will still receive around $600 million to finance the creation of the infrastructure for the homes they’re building surrounding the park.
If the company has any money left over after they’re done with the infrastructure construction, those funds would be under the city’s control, Chi said.
If FivePoint is unable to complete its required construction of homes around the park that finance the special taxes, Chi said it would delay the park’s construction but not sink it.
“With the new agreement, the city’s in a much better situation regardless of what happens with FivePoint,” Chi said. “It doesn’t change the framework of how the funds are split, it changes the timeline of when we access dollars.”
The developer will no longer have any say in what public projects are developed at the park and won’t be responsible for constructing any other projects besides finishing the existing wildlife corridor and backbone infrastructure in the surrounding neighborhoods according to the staff report.
Noah Biesiada is a Voice of OC reporter and corps member with Report for America, a Groundtruth initiative. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.