After years of debating the future of the All American Asphalt plant, Irvine leaders are looking at buying out the factory and shutting it down – potentially ending the plume of smoke that’s hung over residents in the Orchard Hills neighborhood for years.
But that factory is coming at a price of $285 million, a cost city leaders say they’re planning to offset via a land deal with the Irvine Company that will help create a 700-acre nature preserve dubbed the Gateway Preserve next to homes on the north edge of the city.
However, city staff have warned there are risks to the plan they’re laying out for the city council, including the possibility that the city ends up with a piece of toxic land or millions in debt.
“The Gateway Preserve project represents a unique opportunity,” staff wrote. “However, for all of the projected benefits and its notable enhancements to quality of life, the project also represents several significant risks.”
City council members are set to discuss the purchase plan at a special meeting at 1 p.m. on Tuesday, which can be viewed here.
While the factory opened in the 1990s, it’s been drawn to the front of a yearslong fight with residents who argue it’s deteriorated their quality of life and made the air unsafe to breathe.
[Read: Something’s In the Air: Irvine Residents’ Yearslong Battle For Breathable Air]
Irvine City Council members insisted for years there wasn’t anything they could do about the factory aside from sue the company, arguing it was in the hands of the South Coast Air Quality Management District or the state government to shut it down.
But now, there’s a new plan.
In February, City Manager Oliver Chi announced the city was finishing up negotiations with All American Asphalt to buy the factory and shut it down, with plans to finance the purchase by selling a piece of land donated by the Irvine Company.
The plan was hailed by the entire city council as relief for residents and a success for the city.
“The entire city council has been behind this,” said Councilman Mike Carroll at the council’s Feb. 28 meeting. “This feels like government delivering and doing what it’s supposed to do.”
But firm details on the deal weren’t released until Tuesday night in a city staff report, and staff laid out several concerns they had with the proposal.
To review the full report, click here.
The price tag city staff and the asphalt company’s owners arrived at was $285 million, or $24.7 million an acre for the property.
It’s unclear if that’s at market rate.
“This is because AAA has made it clear they will not consider appraisal data in setting the sale price,” staff wrote.
The city also isn’t being allowed to perform much due diligence on the property until after it’s sold, with an agreement to indemnify the asphalt plant’s operators for any potential environmental clean up at the site.
“Because there is no environmental due diligence on the Property … the city may be exposed to substantial environmental remediation costs (size and scope of obligation unknown,” staff wrote.
City manager Oliver Chi said they are “cautiously optimistic,” that there aren’t any issues based on preliminary review in a text message to Voice of OC.
City staff are also looking at purchasing an environmental insurance policy to help partially mitigate those risks, which would cost around $400,000 to $1 million, according to the staff report.
Under the current purchase agreement for the factory, asphalt production would stop by Nov. 15 of this year, with the final sale of the property in Feb. 2024.
In order to speed up the factory’s closure, city staff are asking for the city council to approve a loan via bonds to pay for the purchase.
The current plan is to then pay off that loan once the city sells between 70-80 acres of land along the northeast corner of Jeffrey Road and Portola Parkway donated by the Irvine Company, which staff estimates is worth around $330 million.
That spot will then be turned into a new neighborhood along the edge of a new nature preserve, made up of 300 acres from city owned land and 375 additional acres from the Irvine Company.
The primary benefit for the Irvine Company in helping close the factory is that they can continue developing the Orchard Hills neighborhood without interference from the residents, who have shown up at multiple planning commission meetings protesting any new housing until the factory is shut down.
City staff are warning that if that land sale isn’t done properly, it could saddle the city with debt they’re not ready for.
“Assuming that the City entitles the Gateway Land and is able to maximize revenues earned through a sale of the property, the principal and interest costs associated with the financing could be covered without notable costs to the City,” staff wrote.
“However, if the City elects not to entitle the Gateway Land parcel … or if the ultimate sale of the property is delayed or market conditions change negatively, the City could be left with a significant financial obligation that is not currently contemplated in our long range financial plans.”
They also added that the $330 million valuation they gave the land was not guaranteed to be the final price the land was sold for.
It also remains unclear how much the city knows about the land it’s buying from the asphalt company, with city staff asking for $500,000 to conduct further reviews on all the new land they’ll be taking in.
“Due diligence is expected to be completed by early June. It will provide some limited additional insight as to the (All American Asphalt) site and a good deal more information about the property to be transferred from the Irvine Company,” staff wrote. “We anticipate that our additional due diligence work will refine and/or verify these initial estimates.”
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.