Legacy of the CLC Project and the Option Agreement

[Jim Reardon]

Sam,

After our conversation on Friday, I thought it might be helpful to clarify my position on the CLC Project and the Option Agreement.  I'm aware that you are circulating messages that inaccurately represent my position.  This is politically expected, but unfortunate.

Since the beginning of my interest in the CLC deal, I have consistently avoided personalizing the debate.  Personal attacks have been avoided and great care has been taken to avoid general criticism of the Open Space Committee and the Council members.  I expect as much in return.

Having said that, let me be clear:

• I am opposed to the City's financial involvement in the CLC project as it arises in the Option Agreement.
• I am disgusted by the spectacle of incompetence and bungling governance practice that gave rise to the Option Agreement itself.
• I am astonished that the City Council is so careless with public funds that it would even consider involving the City in this project.
• I am not opposed to the CLC development as generally proposed.  I believe CLC has a powerful business plan and the City should be receptive to their development application.  Let the market decide.

In this day and age, perhaps this is too subtle.  But when Orange County Republicans embrace all manner of excess government spending because they are the government, this project is just too much for me to be silent.  CLC is perfectly capable of completing this project without the financial support of the City.  I have talked with them directly about this and they assure me they don't need the $10 million and they would be happy to keep the land in excess of their needs.  So why involve the RDA?

By involving the RDA and helping CLC with the RR crossing, the City has let the Genie out of the bottle, so to speak.  Now comes Schuller with a plan for 200,000 square feet of office space, enabled by the City's participation.  Meanwhile, another developer is making the rounds of the City, carefully cultivating support for a big non-profit project on the adjacent property.  These things will all happen because the City is clearing the way with OCTA and SCRRA.

The future we all face will not look like the past.  Our City will not soon see the return of real-estate developers funded by Icelandic banks through Lehman Bros.  In fact, we will not soon see a return to prosperity in the County as a whole.  Current conservative projections say that unemployment in California will continue to rise through 2Q2011, where it will hover around 14.5 percent.  And after that, nobody is willing to guess how long it will take to fall.  California recovery is expected to lag national trends by at least a year.

Meanwhile, this City Council seems oblivious.  With the City's tax base shrinking, and City revenues shrinking even faster, we are stacking up debt and future general obligations at an unprecedented rate.  Some of this is self-inflicted, voter approved.  In this regard, the Open Space Bond is no different than the California High Speed Rail Bond.  Both look attractive on the ballot, but both represent irrational impulses.

Still, we're stuck with these impulsive measures and each has already attracted powerful constituencies.  But not so for in the case of the RDA / CLC deal.  This $10 million idea is entirely a creature of the City Council.  It will be your legacy, good or bad.

When considering your legacy, I'd like to point out that the full public cost of the CLC deal, as expressed in the Option Agreement, must be considered.  Conservatively, this project will result in City expenditures of $85 million over the next 20 years.  A portion of this cost, perhaps $18 million, might be returned to the RDA as revenue assuming that the CLC project is an unqualified success.  Mayor Nielsen has estimated this will take 15 years.  But the difference will have to be paid from other sources.  That $67 million amounts to $3.35 million per year. Where will the City find this money?

In contrast, if CLC proceeds without City participation, their development will create increased property taxes (not offset by RDA bond debt and not trapped in the RDA), and it is likely that other revenue from sales tax receipts will also be generated by retail on the site.  How much?  Who knows?  But at minimum, it is zero, which is $67 million better than the City's present intentions.

And what about Open Space?  Before you or Tom Lunnen or Colleen Edwards, or one of the others accuse me of being "against Open Space", please consider the facts.  First, I haven't opposed the RMV Polo Fields acquisition.  I don't oppose it, though I admit to being shocked by the price and terms.  In fact, I supported the Open Space Bond measure.  But what does the CLC Option Agreement really have to do with Open Space?

It should be made clear to the public that the ridges that form the northern entry to our town are already within a Conservation Easement so long as the City wishes it to remain so.  Cost:  nothing.  It should also be made clear that the proposed CLC development (750,000 sq/ft multi-story) and the proposed Schuller development (200,000 sq/ft multi-story) and the Williams plans being floated (multi-story) will completely block any view of the 116 acres, except for the small 20 acre "race track" parcel, which is not really visible even today.

Furthermore, it should be made clear to the public that CLC was already committed to restoration of the orchard areas on land adjacent to their development, and that they would proceed with this restoration using private funds if the City does not acquire the property.  Preservation of this and adjacent areas can be worked out in during the planning process, just as you touched upon Friday during Coffee Chat.  It is no different than Whispering Hills.

So what are we doing here?  Is the City really going to spend $10 million as down payment, and $75 million more over 20 years, in order to control a 20 acre parcel for three or four soccer fields?  Believe me, I love soccer, but that pitch seems a bit rich!

Are we really going to seek Measure M funds and match these grants with City funds (25 percent match) to "restore" land that is entirely hidden by the development?  The cost of this activity is in access of what I've just outlined.

For this reason, I hope you will consider your legacy.  The Option Agreement is a bad deal for the town.  The terms would be different if it had not been worked out behind closed doors, in secret.  That part is an unfortunate cornerstone for the entire Council's legacy.  But what you do from now on will have major consequences.

The approval or disapproval of this project is not before the City Council for decision.  But the Option Agreement is distorting the planning process and as time passes, it will be increasingly difficult for the City to disengage without damaging the developer and the Schullers.  I think it is imperative that the City reconsider the Option Agreement, disclaim it, and invite CLC to continue with the application without the underlying assumption of City participation.  Their plan will look different, but I am assured that they will continue.

Sincerely,

Jim Reardon