A new grand jury report:
- questions whether the Irvine Redevelopment Agency created to usher in development of the Orange County Great Park can fully repay its initial $134 million loan from the city;
- faults the city of ignoring the poor business climate while churning out rosy funding projections;
- blasts the city--and in particular City Councilman Larry Agran--for lying to residents about no new taxes being required to build the park;
- and, accuses the Irvine City Council of conflict of interest.
Otherwise, things are going swell at the former El Toro Marines Corps Air Station.
Here is the exact language of the findings:
- Repayment of $134 million loan. Terms of the loan agreement make it difficult for the Irvine Redevelopment Agency to fully repay its $134 million loan from the City of Irvine.
Forgiving the loan. After setting difficult standards for loan repayment, city and redevelopment officials then agreed to forgive the loan if it is not repaid after the redevelopment agency expires in 45 years.
Business cycle ignored. In forecasting steadily increasing tax increment revenue over the redevelopment agency's 45-year life, agency officials ignored the periodic recessionary effect that the business cycle has on assessed valuation.
- Promises of no new taxes. Despite pledges that no new taxes would be needed to build the Great Park, much of the park's proposed funding will come from new taxes and the redirecting of increased property taxes.
- Potential conflict of interest. It is difficult for differing views to be adopted in Great Park planning because the five people who are City Council members also are the Redevelopment Agency Board members as well as the majority the Great Park board.
You can read the basis for those findings and the rest of the report titled "Financing the Great Park: Now You See It, Now You Don't" here.
The $134 million loan was generally set up so builders fees and increases in the property's value as it was being developed would flow into the redevelopment agency, which would then repay the loan annually. These so-called tax increments, which were projected as the nationwide recession was taking hold in 2008, "now seem unrealistic," according to the grand jury.
Further, enough wiggle room language is contained in the original agreement that annual loan payments can be missed without penalty--or the entire amount could conceivably be forgiven, the grand jury found.
A chapter titled "How to Pay Back a Loan-Sort Of" begins with this explosive introduction (or at least it should be to city residents):
Whether the $134 million loan ever will be fully repaid to the city by the redevelopment agency is questionable. City and redevelopment officials speak confidently of ultimately satisfying the debt. But city officials and the city's lawyers have woven a web of legal phraseology that seems designed to provide reasons not to make payments on the loan. Irvine's own estimates of income and expenses suggest that for the foreseeable future there may not be enough money in the redevelopment agency's till to make sizable loan repayments.
A later subsection titled "Promises and Taxes" takes aim at the city and Agran, the former longtime mayor and one-time presidential candidate who is chairman of the board overseeing the Orange County Great Park Corp.
From the inception of the notion of a Great Park, its most vociferous promoters have promised that the Great Park can be built without it costing taxpayers a cent. The principal purveyor of this pledge has been Irvine's former mayor, Larry Agran, still a City Council member. In his State of the City speech on Jan. 27, 2004, he declared that the Great Park Corp. "will have the responsibility of seeing to it that the Great Park is designed and built on time, within budget, and operated without need for any additional cost to Irvine and Orange County taxpayers."
The same pledge has been repeated many times. In a magazine article published in June 2009, Agran wrote, "No new taxes will be required to build the park."
But those pledges fly in the face of Agran revealing in a July 9, 2009, address that the city and Great Park board were requesting federal stimulus funds--taxpayer money--for park development, according to the grand jury, which also found "other categories of tax funds are destined to be employed in building the Great Park." (They are specified in the report.)
Part of the reason the city/redevelopment agency/Great Park board can pull their smoke and mirrors act is the conflict-of-interest built into the structure of each panel, according to grand jury subsection titled "Five Heads, Three Hats":
Irvine's five City Council members also are the self-appointed five members of the Redevelopment Agency Board of Directors as well as the majority on the nine-member board of the Great Park Corporation. This arrangement creates an enormous potential for conflict of interest because each of the three entities has its own goals, which do not always coincide with the other two.
The grand jury recommends:
- The Irvine Redevelopment Agency Board members (who also are Irvine City Council members) should decide whether they will commit to repaying the $134 million which they borrowed from the city. If they will not make that commitment, they should amend the loan agreement by removing conditions that make full repayment extremely difficult.
- The City Council and the Redevelopment Agency Board should consider amending the forgiveness clause in the loan agreement to ensure that the $134 million loan is repaid.
- Tax increment revenue projections made by the redevelopment agency should be revised to take into account the business cycle that regularly puts the economy through predictable periods of recession and recovery.
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- City officials should inform Irvine residents that new taxes and/or increases in existing taxes may be needed for Great Park construction.
- The five Irvine City Council members should make the boards of the Great Park Corp. and the Redevelopment Agency and the Council independent of one another.
Under the California Penal Code, the city, redevelopment agency and Great Park board must respond to the grand jury findings and recommendations that apply to each panel.
At least it won't be hard rounding up the members of those panels.