NEWS ANALYSIS : Orange County Builders in Driver’s Seat : Bankruptcy: Developers have long enjoyed clout with Board of Supervisors. Their futures will rise or fall with the region’s fortunes.
As the story of Orange County’s financial collapse is written, historians may find it fitting that it was the region’s high-powered developers who spearheaded the plan the Board of Supervisors endorsed this week as a springboard to recovery.
After all, the developers will be hard pressed to build more houses and shopping centers if potential buyers fear that streets will go unbuilt, schoolchildren will receive inadequate educations and police departments will be unable to keep their officers on the beat.
Indeed, two local historians have linked the bankruptcy to the often-cozy relationship between the supervisors and the developers, who, along with architects and other building industry mainstays, have been the source of more than 40% of all political contributions received by county supervisors.
Orange County’s political leadership has long been “predisposed to favor the needs of the . . . pro-growth oligarchy,” bankers, financiers and developers such as Irvine Co., Rancho Santa Margarita Co. and Mission Viejo Co., says a new preface to the book “Postsuburban California: The Transformation of Orange County Since World War II.”
Unlike manufacturing companies, which sometimes pack their bags and move when the local economy sours, Orange County’s developers are “rooted in this space,” said co-author Spencer Olin, dean of UC Irvine’s School of Humanities. “They must work to ensure that the community has a viable economic future.”
The recovery plan was crafted by developers George Argyros, chairman of Costa Mesa-based Arnel & Affiliates, and Gary Hunt, executive vice president of Irvine Co., along with Pacific Mutual Life Insurance Co. Chairman Thomas C. Sutton.
The plan, which ran into widespread criticism Wednesday, offers investors immediate access to 77 cents for every dollar they had in the county’s failed investment pool. It also offers marketable notes for the remainder. None of the three business leaders would comment on the plan Wednesday.
“They prefer to wait until after the investor committee weighs in,” said Todd Nicholson, president of the Orange County Business Council, a broad-spectrum group that represents nearly 6,000 local businesses, including major development companies.
When the Business Council presented its plan Tuesday, Argyros painted a bleak picture of the future if “responsible elected officials” fail to adopt it--along with massive government spending cuts and, most likely, a higher sales tax. Argyros predicted a “meltdown” of Orange County’s economy and its vaunted “quality of life” if the stiff prescription isn’t followed.
Argyros’ fears are well founded, said author Rob Kling, a UC Irvine professor and critic of development.
“Parents in (cash-strapped) school districts are keenly aware of the quality-of-life issue, as are people whose immediate short-term interests are touched by funding cuts,” Kling said. “But people are not aware of the way flood control, police and emergency services, the court system . . . are going to get hit.”
The bankruptcy has already tarnished Orange County’s image, Kling said. He said he knows of one Los Angeles County aerospace executive who has postponed moving to Orange County until Irvine proves it won’t be forced to dismantle its award-winning school district.
Kling is also betting that long-term fiscal woes stemming from the bankruptcy might accomplish what environmentalists and slow-growth advocates have never managed: a severe, long-term building slowdown that will persist even if the nationwide recovery continues.
“The development picture in Orange County is going to be very tough,” Kling said, if potential home buyers fear that local governments will be unable to provide much-needed roads, quality education and public safety services.
Developers and the county supervisors have “most often been as one in promoting rapid and unrestrained growth,” the book’s new preface suggests.
Kling, who acknowledged that his slow-growth views place him in the minority, suggested that the Business Council’s bankruptcy plan might not be in the county’s best interests. Developers, he said, “are not going to restructure Orange County government in a way that would threaten their economic interests.”
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