Despite its progressive reputation, Laguna Beach is a place that views change skeptically. A government board here effectively has the power to veto a resident's choice of house paint or the location of windows. Town authorities officially discourage national chain stores from moving in to compete with local mom-and-pop shops. Recently, unamused residents whined that they needed a scorecard to keep up with local grocery-store changes. Albertsons became Ralphs after Albertsons bought Lucky, a store that will retain the Lucky name—ostensibly to avoid even more confusion.

So it's easy to imagine the town's frustration when residents learned last month that their City Council had hoodwinked them into supporting an April referendum that paved the way for massive commercial and residential development at the city's last large, undeveloped oceanfront property: historic Treasure Island. Contrary to claims that Laguna Beach taxpayers would pay "nothing," city officials now reluctantly confess they were wrong. Residents will, in fact, subsidize the exclusive privately owned project to the tune of at least $5 million—twice as much as even the project's most vociferous opponents had estimated during the campaign.

Ironically, it was the council and the developer who warned during the campaign, "Don't let politics get in the way of good community planning." Another developer-paid ad questioned the integrity of project opponents who argued that Treasure Island was an opportunity to create a landmark park for residents and tourists. The pro-development ad featured photos of supportive council members Paul Freeman, Wayne Peterson, Steve Dicterow and Kathleen Blackburn and asked, "Who do you trust?"

The answer is now pretty clear. For some in town, "hoodwinked" isn't strong enough a description for the deception. One said he felt "sodomized" by his own elected officials.

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In some Orange County cities, such as Newport Beach and Laguna Niguel, politicians don't have to hide their close working relationships with wealthy real-estate developers. Some of those cities' elected officials openly mock environmental and quality-of-life concerns. But that's not the case in Laguna Beach. All serious, electable candidates in the self-styled artists colony understand they must always employ environment-friendly rhetoric regardless of their fondness for the developers who fund their campaigns. As a rule, however, this type of crafty politician doesn't like to be unmasked.

On Aug. 17, soft-spoken and respected resident Becky Jones stood before a visibly uncomfortable Laguna Beach City Council. Based on the council's representations during the referendum campaign, she said, she had voted for the Treasure Island project. Four months later, she was back. She wasn't smiling. The council was considering a postreferendum development agreement concocted largely by the developer and its council ally Freeman, who is by day a lobbyist for one of California's most prominent real-estate development companies, C.J. Segerstrom & Sons.

To Jones, the agreement significantly risked leaving taxpayers "holding the financial bag."

"As someone who voted yes on the recent Treasure Island referendum, I am extremely concerned that this development agreement represents a significant expansion of the city's financial responsibilities coupled with an erosion of public benefits [touted in the campaign]," said Jones. "We will end up paying for some very expensive improvements if we accept this."

The highlight of the meeting may have come when Dicterow (whose initial campaign six years ago was funded by pro-Treasure Island interests) asked fellow council member Toni Iseman to refrain from publicly discussing specific details of the agreement until a later time. Iseman, the only council member who has shown independence from the Treasure Island developers, ignored the plea, dimmed the chamber lights, and displayed numerous overhead charts detailing how the proposed agreement relied on taxpayer subsidies and reneged on previous open-space understandings.

Under dogged questioning, Iseman dragged out of city manager Ken Frank a few of the costs taxpayers will bear. "I'd say, $900,000 in waived fees—clearly at least," Frank said. "We're probably talking about $1 million to $1.5 million for the park . . . $57,000 for a new traffic signal . . . $101,000 for [environmental cleanup] . . . $500,000 for 50 parking spaces." Iseman laid out the public costs as she understood them. Total: up to $6 million.

"One of the promises made in the campaign was if you don't like this [plan], it's only going to get better. The only thing I can say is that it has not gotten better," Iseman said as a slouched Dicterow pressed a pen against his forehead and a long-faced Freeman glanced sympathetically at the developer's representative, who was sitting in the audience. Gone were the campaign smiles and happy talk as Iseman helped give the lie to several officially printed falsehoods: that 50 percent of the project would be open-space park; that a new traffic signal and crosswalk would be paid for entirely by the developer; and that the developer would "pay all maintenance costs" for a park. During the campaign, pro-project council members didn't feel obligated to admit that while the developer will pay some costs upfront, he can later bill taxpayers for the costs, plus interest charges.

"Is this interest simple or compound?" Iseman asked Peterson and Freeman, who have represented residents in behind-the-scenes meetings with the developer. Freeman said nothing. Peterson acknowledged it was a "valid" question. Despite advocating approval of the proposed development agreement, he conceded that he didn't know the answer.

Peterson's negotiating partner didn't fare better under close questioning. Iseman asked Freeman why he assumed on behalf of Laguna taxpayers a previously undisclosed liability for $200,000 or more of the developer's environmental-cleanup costs. Freeman's response: he gave that concession to the developer after the referendum in return for a promise that the property would not be reopened as a mobile-home park. Nobody pointed out that the referendum—which Freeman helped place on the ballot—had already made that an impossibility. As if his words could soothe ugly reality, Freeman held steadfast. The post-election concession, he maintained, was a "substantial value" for taxpayers.

"All I can say is that we've been having these discussions for years. All I can say is that I think this is a good framework. I think it's a fair agreement," said a visibly rattled but unrepentant Freeman, who repeatedly broke council protocol by seeking guidance from the developer's representative in the audience. Then, with all the sincerity he could muster, Freeman said, "I hope everybody keeps on top of this."

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