Corridor Cities OK Developer Fee Plan to Finance Freeways

After more than a year of negotiations, 10 cities along the routes of three proposed freeways have reached agreement on a plan to assess developers $415 million to cover nearly half the costs of building the thoroughfares.

The plan, presented Monday to the Orange County Transportation Commission, represents a delicate balance of interests for cities seeking to attract new development, builders hoping to hold down construction costs and transportation planners who say the freeways are necessary for Orange County’s future growth.

During the next two months, all 10 cities along the freeway routes will bring the new agreement to their city councils for preliminary consideration. Full public hearings will be scheduled in each city before the fee program is adopted.

“I believe the resolve of all the cities to go forward and make this work is enthusiastic now. . . . The attitude has almost changed 180 degrees since we first started, to where we now have an understanding that the transportation system does need to go forward,” said Supervisor Thomas F. Riley, a member of the commission who co-chaired the negotiating committee.

Yorba Linda Meeting

Yorba Linda will consider the agreement on July 15. But so far, the other cities proposed for inclusion in the new joint powers authorities--Anaheim, Irvine, Orange, San Clemente, San Juan Capistrano, Santa Ana, Tustin, Costa Mesa and Newport Beach --have not set hearing dates.

Laguna Beach, which also lies within the area served by the San Joaquin Hills corridor, has voted not to participate in the fee program discussions because of the city’s opposition to the size and design of that freeway.

Negotiations over the past several months have been fraught with disagreement. Central Orange County cities competing for lucrative new commercial development have fought to include all cities near the new freeways in the fee program to avoid giving any city an unfair competitive edge. And nearly all the cities have lobbied to make sure that city officials--not just the county Board of Supervisors--will have a strong voice in the design and construction of the new freeways.

Overcoming Objections

However, transportation commission officials said Monday that steps taken thus far--revisions to the area proposed for fee assessments to incorporate rapidly developing areas like south Santa Ana and north Costa Mesa, provisions to base fees on the amount of traffic generated by new development and the creation of two independent governing authorities to establish more local control--have resolved most of those concerns.

The program proposes to establish two new joint-powers authorities, on which each nearby city has an equal vote. These authorities would oversee the design and financing of the new San Joaquin Hills freeway linking Mission Viejo and Newport Beach and the Foothill/Eastern freeways, running through the county’s southeast foothills between San Clemente, Tustin and Anaheim Hills.

By assessing new homes a fee ranging from $1,010 to $1,305, and new commercial development $1.30 to $1.75 per square foot, the program will raise about 48% of the $857.8 million needed to build the new freeways. Fees will be assessed within a 413-square-mile area that includes nearly everything south of the Costa Mesa Freeway, with developers who contribute the greatest share of traffic to the freeways paying the higher fees.

Significant disagreement remains, however, over the issue of whether new development should be assessed substantial fees for new freeways that many Orange County residents may not want. In Irvine, signatures from 10,150 residents have been submitted on a “Citizens’ Right-to-Vote” initiative seeking a citywide election on any new tax or fee for new freeways.

If certified, the measure, sponsored by a group called the Committee of Seven Thousand, would be placed on the November ballot, potentially a key decision point for the success of the developer-fee program, since Irvine is expected to generate the single largest chunk of fee revenues, about $150 million.

Legal Challenge Possible

However, the Irvine Co., which has development heavily dependent on all of the new freeways, may be considering a legal challenge to the ballot initiative.

In a May 23 memorandum to Irvine Co. executives, which was made available to The Times, Sacramento attorney John E. Mueller said the measure could be attacked in court based on an argument that new freeways are the responsibility of the state and are therefore beyond the jurisdiction of the local initiative process.

“You have asked us to review an Irvine initiative proposing a citizens’ right-to-vote ordinance. At this time, we have only conducted a preliminary review. Nevertheless, we have tentatively concluded that the initiative may be invalid because it does not contain a proper subject for exercise of the initiative power. . . . Electors of a municipality may not legislate on matters regarding state highways,” Mueller wrote.

A Technical Question

Irvine Co. President Thomas H. Nielsen said Monday: “I think the question is always there as to whether this kind of initiative, the way I read it, is the kind of thing that one can vote on. If you read the initiative as I see it before me, I don’t think anybody opposes people’s right to vote. The question really comes to be much more technical, as to what we can vote on, and there’s no question we along with many others will be looking at whether this thing can be in some way challenged.”

John Erskine, executive director of the Orange County Building Industry Assn., said the organization’s transportation committee will also be looking at legal issues relating to the ballot measure, though there has been no decision to challenge it.

The organization supports the fee program, even though it has opposed assessing varying fees based on traffic, Erskine said. “We don’t see any alternative. We believe that the approved projects and the adopted general plans in the various cities were based on the anticipation that these (freeways) will be completed,” he said.

Said Nielson, whose company will pay an estimated one-third of all the fees assessed under the program: “We were, I think, from the beginning saying we felt the newly developing properties should pay some fair share of these (freeways). . . . To have them built requires some portion of the roadway be paid by future users.”

Passing on Fees

Developers say it will be up to the market to determine whether the fees are passed on directly to home buyers and shoppers. In most cases, Erskine said, it is likely that land developers will have to absorb the fees in the form of lower land costs.

But Irvine City Councilman Larry Agran, who helped draft the ballot initiative, said the fees represent a tax on both new home buyers and existing residents who will pay indirectly through higher retail costs.

“It’s absolutely laughable when you’ve got the (Building Industry Assn.) touting some kind of a legal challenge (to the initiative). What could be clearer in terms of the ultimate impact of this fee? It’s not on the developers. It will be paid in the main by everyday consumers in the city of Irvine,” he said.

The fee program follows on the heels of a ballot measure last year that would have raised the local sales tax by 1 cent for transportation improvements. That was also backed by large development firms and county transportation officials --and resoundingly defeated by voters, Agran said.

The Board of Supervisors has tentatively scheduled preliminary consideration of the new agreement for July 30, a date on which the board would review the plan and set a public hearing sometime within the next few months.

The county, through the board, has led the move to adopt the developer fee program and has been imposing fees since last year. Already, $3.3 million has been collected in the unincorporated areas, but the new agreement will require substantial changes in the county program because of the new fee levels and structure proposed in the agreement.