NEWS ANALYSIS : ORANGE COUNTY IN BANKRUPTCY : Putting the County’s Houses on Order : Bankruptcy: Developers prominent in pushing recovery plan embraced by supervisors could have future projects in mind as much as current residents.
It’s not surprising that developers George Argyros and Gary Hunt grabbed lead roles in negotiations that led to the proposed plan that the Orange County Board of Supervisors has embraced as a springboard to a fiscal recovery.
After all, developers will be hard-pressed to build homes and shopping centers if potential home buyers fear that streets won’t be built, schoolchildren won’t be educated and police departments won’t be able to keep officers on their beats.
Argyros, chairman of Costa Mesa-based Arnel & Affiliates, and Hunt, executive vice president of the Irvine Co., share the credit with Pacific Mutual Life Insurance Co. Chairman Thomas C. Sutton for crafting the plan that offers investors immediate access to 77 cents for every dollar they had in the county’s failed investment pool. The plan also offers marketable notes for the remainder.
The three business leaders on Wednesday declined to comment on the plan. “They prefer to wait until after the investor committee weighs in,” said Todd Nicholson, president of the Orange County Business Council, a broad-based group that represents nearly 6,000 local businesses, including the area’s major development companies.
When the Business Council presented its plan on Tuesday, Argyros painted a bleak picture of Orange County if “responsible elected officials” fail to adopt the plan--along with massive government cuts and, most likely, a sales tax increase. Argyros warned of a potential “meltdown” of Orange County’s economy, along with the area’s vaunted quality of life, if the stiff prescription isn’t followed.
Argyros has reason to fear for the worst, said Rob Kling, a UC Irvine professor and co-author of the book “Postsuburban California: The Transformation of Orange County since World War II.”
“Parents with children 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 in which flood control, police and emergency services, the court system . . . are going to get hit.”
Kling, a critic of Orange County’s fast-paced development industry, contends that developers are looking past the current economic pain: “I have to wonder if Argyros is referring to the quality of life for people already living here or the attractiveness of a county to new people moving here to homes that have not yet been built.”
The bankruptcy already has tarnished Orange County’s image, said Kling, who says he knows of one Los Angeles County aerospace executive who postponed a move to Orange County until Irvine proves that it won’t be forced to dismantle its award-winning school district.
Kling is also betting that long-term fiscal woes prompted by the bankruptcy might accomplish what environmentalists and slow-growth advocates have never accomplished: a severe, long-term slowdown in home-building in Orange County that will persist even if the national economic recovery continues.
“The development picture in Orange County is going to be very tough,” Kling said, if potential home buyers fear that local governments won’t be able to provide much-needed roads, quality education and necessary public safety services.
Kling and his co-authors, in a preface written for the next edition of their book, link the bankruptcy to the often-cozy relationship between county supervisors and developers, who, along with architects and other building industry mainstays, historically have made more than 40% of the political contributions received by county supervisors. That made them by far the largest campaign contributors to the supervisors during the golden 1980s.
Developers and the supervisors have “most often been as one in promoting rapid and unrestrained growth,” the new preface suggests.
Kling and his co-authors contend that the board historically “has been predisposed to favor the needs of the county’s pro-growth oligarchy (bankers, financiers and developers, such as the Irvine Co., the Rancho Santa Margarita Co. and the Mission Viejo Co.)”
But, unlike manufacturing companies, which sometimes pack their bags when the local economy sours, Orange County’s developers are “rooted in this space,” said Spencer Olin, “Postsuburban California” co-author and UCI Humanities School dean. “They must work to ensure that the community has a viable economic future.”
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.”
