Direct Financing of Freeways Studied : Irvine Co. Payments to County Could Skirt Popular Vote on Fees

Orange County transportation officials, facing potential defeat of a developer fee program in Irvine, are considering an option that would allow the Irvine Co. to contribute millions of dollars to the building of freeways even if Irvine voters reject financing for them.

The proposal, under which the Irvine Co. would directly contribute $105 million or more, is being considered as debate rages in Irvine over a proposed ballot initiative that would require voter approval of any new taxes or fees levied for freeway construction.

Though he called the discussions “very preliminary,” Stan Oftelie, Orange County Transportation Commission director, said this week he has talked with company officials in the past few weeks about simply electing to pay out of its own coffers any fees not authorized by the voters, thus clearing the way for construction of the new freeways.

“If the City of Irvine does not choose to participate (in the fee program), we’d probably begin open discussions with the Irvine Co. to see if they would pay the fees anyway,” Oftelie said.

The proposal would have the effect of allowing the freeways to be built even if Irvine voters are opposed to them, and it would exclude Irvine city officials from the governmental authorities that are to decide the ultimate size, construction schedule and routes of the three new corridors in south and east Orange County.

Because the Irvine Co. owns most of the undeveloped land in Irvine--and theoretically would pay about 85% of the fees assessed in that city if the program were adopted--the company would be no worse off paying 100% of the fees directly to the county instead of going through the mechanics of the developer fee program, Oftelie said.

“It’s a unique situation, with one major landowner in the city owning large amounts of undeveloped property,” he said. “And it’s ironic, in that (the City of) Irvine’s ability to shape the nature and design of the corridors would be diminished.”

So far, Oftelie said he has only talked with middle-level management officials at the company about the proposal. Irvine Co. spokesman Jerry Collins said Wednesday that he was not familiar with the details and “we don’t know as yet what our position on that would be.”

Bill Vardoulis, a former Irvine city councilman who now acts as a part-time consultant to the Irvine Co., said he proposed the alternative financing to company officials several months ago.

“I’m sure they’re considering it,” he said. “If an initiative of this type were to work--and it’s really only intended to stop the San Joaquin Hills corridor--if that were to work, I would think that developers would get together and just do it directly.”

From the developer’s standpoint, there would be little difference between paying the fee through the program or paying it directly to the county. Developers already make large contributions to road improvements, both directly and indirectly.

The primary difference between the two methods is that direct payment could circumvent the expressed will of the voters and preclude the city from having an official voice in planning the new freeways.

An Irvine citizens’ group, the Committee of Seven Thousand, has collected signatures from 19% of the city’s registered voters on an initiative that would require a citywide election before any new fees or taxes are assessed for new roads.

The City Council has delayed acting on the initiative, however, as a result of a lawsuit filed by a coalition of developers and businessmen representing nearly 2,800 companies, the Building Industry Assn., the Industrial League of Orange County and the county and Irvine chambers of commerce.

Voter Authority Challenged

The coalition’s lawsuit claims local voters do not have the authority to thwart financing plans for regional transportation facilities. The opponents say that initiative proponents are simply trying to block construction of the freeways by impeding efforts to pay for them.

Developers have supported the fee program, which covers 10 cities in central and south Orange County, because they regard it as the only way to pay for what they see as badly needed freeways.

Virtually all of the Irvine Co.’s future development will be near the planned freeways, and much of it cannot occur unless the new roads are built. Irvine Co. President Thomas H. Nielsen said recently that he expects the company will pay at least a third of the $411 million in fees expected to be assessed under the program.

The recent discussions underscore the important, behind-the-scenes role the company has played in the freeway fee negotiations--a role that has been a cause of controversy in Irvine.

During Tuesday night’s City Council meeting, Councilman David Sills accused fellow council member Larry Agran, who helped draft the ballot initiative, of holding “secret meetings” with Irvine Co. officials over the weekend to develop a compromise on the issue.

Agran conceded that he met Sunday at the Irvine Hilton coffee shop with Irvine Co. vice presidents Jack Flanigan and Monica Florian, hoping to discuss a compromise in the lawsuit against the ballot initiative that would win the company’s support, even though the company is not one of the plaintiffs in the case.

Talk of ‘Secret Deal’

“That’s the so-called secret meeting and secret deal,” he said.

Sills: “This is the first time the council heard of any third alternative, other than through the rumor mill.”

Agran: “I doubt that. I think you’re well connected to the people with whom I met in secret in the coffee shop of the Irvine Hilton Hotel.”

Sills: “I mean, nobody else was invited . . . .”

Agran: “Well, I’m sorry. You’ll have to ask the people at the Irvine Co. why they didn’t invite you.”

Councilwoman Sally Anne Miller: “I’m not aware of the . . . coffee shop meeting at the Hilton, but I would question why one would want to talk to the Irvine Co., when the names on the suit I have before me say the Building Industry Assn. of Southern California, Irvine Chamber of Commerce, Richard Munsell, Ralph Clock (president of the Industrial League).

“Why wouldn’t you be speaking to all of these people, if that was your intention, to effect some sort of compromise? I guess I just don’t understand.”

Agran: “Mrs. Miller, when I was about 6 years old I learned the difference between the puppet and the puppeteer, and I think in this case, the party without whom the lawsuit would have been impossible is the Irvine Co. . . . . Everybody pretty much acknowledges that who knows the score around here, and I suspect in the privacy of your own thoughts, you acknowledge it, too.”

The repartee was reflective of concerns expressed by council audience members throughout the four-hour hearing. Many of the speakers cited the company’s acknowledged philosophical support of the lawsuit and charged that Irvine Co. officials are trying to subvert the residents’ right to vote on the fee issue.

During the night, Nielsen was alternatively referred to as “a very nice man” and “King George III.”

Offers of Compromise

Flanigan said Wednesday that he attended the meeting at Agran’s request and agreed to transmit the councilman’s offers of compromise to the lawsuit plaintiffs. “He had said, ‘I think you guys can help facilitate a solution.’ We’re happy to do anything to be responsible to come to resolution on a very unsettling issue in this community,” he said.

But Flanigan scoffed at allegations that the company is taking a hidden role in the lawsuit itself. “To say that we’re the puppeteer, in my opinion, is an attack on the integrity of every individual who sits on every one of those boards who made the decision to participate in the lawsuit,” he said. “It seems to me the grossest form of political rhetoric, and it’s designed to obscure the real issue.”

Agran’s compromise overtures have been directed at allaying concerns that the initiative could affect any fee program assessed for road and traffic improvements in Irvine. He has offered instead substitute wording, perhaps in the form of another ballot issue, to specify that voter approval is required only on new taxes and fees for the proposed San Joaquin Hills, Foothill and Eastern freeways.

Flanigan said that the possibility that the initiative as written could require voter approval “for every single new road, stop sign and intersection that’s built in Irvine” was a concern, although company officials “have absolutely no problems sending the freeway issue to a vote of the people.”

Irvine officials canceled a special City Council meeting today, because no progress was made in a Wednesday closed-door meeting in which Agran, Mayor Dave Baker and lawyers for the plaintiff tried to find a compromise solution.

Opposed to Precedent

The executive director of the Building Industry Assn., John Erskine, said that group would oppose the initiative even if it were restricted to the freeways because the organization is concerned about the ability of city voters to block transportation systems of statewide significance.

“We won’t be compromising,” he said. “We will be continuing the lawsuit full force.”

A Superior Court hearing on the lawsuit is scheduled for Aug. 8. The council will meet after the hearing to decide whether to adopt the initiative as an ordinance or schedule a popular vote. If the city wants to consolidate the election with the county November general election, it must make a decision by Aug. 9.

Meanwhile, Agran said he has heard of discussions with the Irvine Co. about private financing of the new freeways if the initiative is defeated, and he does not necessarily oppose the idea.

“I have no problem with that. They can do it tomorrow,” he said. “The difference is they won’t do it because they know the $150 million (now proposed as Irvine’s share of the developer fees) is just a down payment. Nobody in their right mind believes that these freeways can be built for less than $3 billion, and perhaps more, and even the Irvine Co. can’t afford half a billion dollars,” Agran said.