State Puts Laguna Canyon Deal on Hold

The state is threatening to pull out of a $4-million deal to buy 82 acres of wilderness in Laguna Canyon because the Irvine Co. has attached a long list of conditions that officials say makes the land undesirable as an ecological reserve.

The dispute throws a monkey wrench into plans to create a state wildlife sanctuary on the land, which would be part of a much larger coastal regional park, and could leave the city of Laguna Beach footing the bill.

In a widely lauded agreement, Laguna Beach earlier this year agreed to buy 2,150 acres of Laguna Canyon from the Irvine Co. for $78 million. In August, the California Wildlife Conservation Board decided to buy 82 acres of that land from the city, and deposited the money into escrow.

But, in mid-October, a few days before the deal closed, the state agency learned of 20 pages of deed restrictions that would allow the Irvine Co. to retain key rights to the property.

Among the conditions, the Irvine Co. would keep water and mining rights, authority over restoration and maintenance of the wildlife habitat, and rights to install utilities. The company also wants the right to use the property to satisfy open space requirements of future development projects.

“This essentially would give them every right to the property,” said Larry Sitton, Southern California wildlife management supervisor at the California Department of Fish and Game, which advises the state board on land purchases. “We would be the owner, but they would have rights to it.

“It’s like buying a home and having someone come in and say you can live here, but they get to establish the conditions in which you live.”

Surprised by the conditions, state officials have called the terms unacceptable and have put the purchase on hold. The deal would have closed in late October if it wasn’t for the complications.

Representatives of the Irvine Co., Orange County’s largest landowner and one of California’s most influential developers, said Wednesday that the conditions are standard in their land deals and are not intended to jeopardize the state reserve.

“The basic goal of the transaction was to take a very sensitive parcel of land, and not to develop it, but preserve it forever,” said Irvine Co. spokesman Larry Thomas. “We have a deal that will do that, and we feel the terms and conditions will assure that will happen.”

Situated just off Laguna Canyon Road near El Toro Road, the land known as Laurel Canyon contains several endangered species of flowering plants, two rare lizards and several rare birds, including California gnatcatchers and cactus wrens.

The Fish and Game Department’s regional managers in Southern California called the new conditions “unreasonable” in a strongly stated memo sent Friday to Fish and Game Director Pete Bontadelli in Sacramento.

The conditions “completely eliminate the desirability of the property as an ecological reserve and for wildlife in general,” the memo says. “The Irvine Co. would maintain legal control of nearly all aspects of the land.”

Laguna Beach Deputy City Manager Rob Clark said Wednesday that he believes the differences can be worked out.

“The state’s concerns are legitimate,” Clark said. “The state is absolutely right to wave a red flag and say wait a minute, what’s going on there. So it’s incumbent on the city and the Irvine Co. to make sure everything is acceptable to them. The city is working with both parties to try to resolve this, and I believe they ultimately will be resolved.”

Irvine Co. officials said they do not plan to reopen negotiations because the land has already been sold to Laguna Beach.

“We haven’t entered into any discussions about modifying the agreement,” Thomas said. “There would be great resistance to reopening an agreement that took months to hammer out and in which a number of different parties signed in good faith.”

The city, however, neglected to tell the state agency about the new restrictions. State officials did not learn of them until Oct. 18--when the title company sent the deed for final signatures--three weeks after escrow opened, Dick said.

If an agreement cannot be reached, Clark said the city of Laguna Beach will have a major financial problem, since the city paid the Irvine Co. $4 million with the understanding that the state would reimburse it this year.

The 2,150 acres of lush wilderness in Laguna Canyon was originally slated for a huge housing development called Laguna Laurel. But the Irvine Co. agreed to sell it to city and county officials for parkland because of intense pressure from local environmentalists.

In June, the city of Laguna Beach closed the deal with the Irvine Co. with a down payment of $33 million in exchange for 1,286 acres of land. It reserved options to buy the rest of the land for a total of $78 million.

The agreement had been heralded statewide as a historic deal and an inspirational example of cooperation between private and public interests in preserving wildlife habitat.

City and county officials and local environment groups expressed concerns about the same deed conditions that now bother the state. The Laguna Beach purchase agreement was delayed by several months, but after some compromises, they signed off on the conditions in April.

Clark said the city’s negotiators agreed to the limitations because they felt assured that parkland would not be jeopardized.

“They were conditions that the city and county felt they could live with and that would not be contrary to the public interest,” he said.

Sitton, however, said the state has stricter standards for ecological reserves, and will not agree to spend public money when a private party retains rights that might jeopardize the wildlife habitat.

The $4 million in state bond money comes from a $776-million fund created by Proposition 70, which voters approved in 1988 to acquire land for wildlife and public parks.

Fish and Game officials are especially concerned about losing water rights, since riparian wetlands are the main reason the land is vital to wildlife.

But Thomas said a clause in the agreement ensures that surface water would not be impacted, so the wetlands are safe. The intention was only to ensure that valuable ground water basins, which serve the entire area, would not be harmed, he said.

“We have no intention of going back in and draining the lakes,” he said. “If anything, we wanted to assure that a mechanism existed to ensure the land and the lakes could be improved.”

Another controversial term of the sale is that the Irvine Co. would retain “the right to restore degraded wildlife habitat or natural resources . . . and to manage and maintain existing wildlife habitat and natural resources.”

“These are the reasons we bought this property and if those rights don’t come with it, we’re not interested,” Sitton said.

Thomas said the clause was included to ensure that if the new owners do not conduct habitat restoration, the company could do it.

“It has not been unusual for our company to sell somebody land with an agreement that it be used for a single purpose, only to find somewhere down the line somebody wants to be relieved of that restriction,” he said. “Our interest is in seeing that the integrity of this deal is maintained forever.”