Laguna Beach Council, Irvine Co. in Stalemate Over Price of Canyon

Efforts to keep the Irvine Co. from developing a portion of scenic Laguna Canyon suffered a setback Wednesday when talks between the company and city officials broke down over the purchase price.

The Irvine Co. offered to sell the 2,150-acre Laguna Laurel site for $90 million, but the city said it could not go above $70 million.

The stalemate raised doubts as to whether both sides can come up with a plan in time to allow campaigning for a $20-million bond measure on the Nov. 6 ballot to help pay for the land. Supporters of the bond proposal, Measure H, said voters would not approve a tax increase unless they know how the bond will fit into an overall plan to save the canyon from development.

“I have not yet thrown in the towel,” said campaign manager Paul Freeman, who was hired by both the city and the Irvine Co. to help forge a purchase agreement. “But at the same time, the sand is running through the hourglass here. There’s not much more time to dance.”

Councilman Robert F. Gentry, a member of the negotiating committee, said he felt frustrated after Wednesday’s three-hour bargaining session, but held out hope that the company would reduce its price.

“I thought the City Council came in with a substantial offer to buy the land, and I did not expect the company to be as rigid as it is. Sixty-five million dollars is not unrealistic at all for a community of 25,000, where the city would be giving up a number of projects it has on line in order to move its resources toward the purchase of the canyon.”

Company officials said their offer was based on the land’s appraised value of $105 million, plus $30.2 million in infrastructure improvements required in their development agreement with Orange County.

In its proposal, the company offered to exclude the $30.2-million cost and make a cash contribution at the end of a five-year buyout period of $15 million, for a total sales price of $90 million.

Irvine Co. Senior Vice President Gary Hunt said other incentives included eliminating the interest costs, estimated at $29 million, and selling 90% of the land in the first year for a down payment of $40 million.

The 1,800 acres that would be available in the first year is located west of Laguna Canyon Road, where half of the project’s 3,200 homes are scheduled to be built. Most of the property--or 1,315 acres--was targeted as open space in the Laguna Laurel development plan. Given the amount of land that would be sold the first year, Hunt argued that the proposal would be attractive to voters.

“Short of giving it away, what more is there to do?” Hunt said. “From our perspective, we have moved mountains to get to what we think is a very, very fair plan.”

But opponents argued that the company’s starting position of $135.2 million was unreasonable since it was based on the land being developed instead of being in its natural state.

City officials and environmental groups, which had talked at one time of paying $50 million, made a counteroffer Wednesday of $65 million over a six-year period, including a $33-million down payment and $20 million due in the final year. During the session, the city informally raised its offer to $70 million.

Gentry said the city would have been required to raise $11 million in addition to the $20 million raised by Measure H if approved by voters. The city also was counting on a $10-million contribution from the county.

He said that would have included postponing the construction of a proposed city parking garage and seeking state grants.

Councilman Neil Fitzpatrick, who is not a member of the negotiating team, said the city’s offer was “a stretch” and counted on money it was not sure would be available. So the company’s $90-million price tag, he said, was out of the question.

“I believe the company has had a reasonable idea as to what we could afford all along, and for us to try to get an offer that’s just doomed to failure would really perpetuate fraud on the citizens,” he said. “We have to give the citizens something that’s doable.”

Added Councilman Dan Kenney: “We are talking about a substantial amount of money. If (the city’s offer) was $70 million, that was equal to one-fifth of what (Irvine Co. Chief Executive Officer) Don Bren paid for the entire Irvine Co.”

The executive director of two environmental groups involved in the discussions, Michael Phillips, accused the company of losing sight of what $1 million means to ordinary citizens.

“They have the opportunity to save something. This cannot be all about money,” he said.

The environmental groups--Laguna Greenbelt Inc. and Laguna Canyon Conservancy--are challenging in court the validity of the company’s development agreement with the county.

Laguna Greenbelt President Elisabeth Brown said agreement has “artificially inflated” the value of the land and affected the land-purchase negotiations.

If both sides cannot agree soon, Gentry said, the campaign to save the canyon “will be back to the trenches to modify and/or stop, that development, and I frankly hope we do not come to that.”