$5-Million Subsidy Seen for El Toro Start-Up Costs

Orange County will have to pay nearly $5 million out of its general fund--more than double its original estimates--for renovation and start-up costs the first year it leases the former El Toro Marine base, according to a county projection released Wednesday.

The projection shows the county in the red for two years, then earning its first profit by the end of its third year. Ultimately, the county will generate revenue of $14 million in its fifth year, the projection shows.

“These figures are very, very preliminary,” cautioned Rob Richardson, interim executive director of the new El Toro planning office.

Supervisors approved the lease at its meeting Tuesday, ending a year of negotiations with the Navy. The lease is scheduled to be signed before Sept. 1.

Supervisors, including Tom Wilson who had been involved in lease negotiations, have said they want interim use at the base, including building leases and recreational programs, to be self-supporting to protect the general fund, which goes to provide basic county services.

But the new lease will have to be subsidized by general fund money for at least two years, if not longer, until the base budget is in the black. Despite the outlook, Wilson said it still makes good business sense to spend “money now to make money later.”

“I am opposed to using general fund dollars,” Wilson said. “But we need seed money and it may require some general fund money. But I think we can recover it.”

The projection, prepared by the county’s El Toro Master Development Program, shows some of the risk involved for the county.

Supervisors still must decide on several major policy issues that will dramatically affect the lease’s financial picture.

Richardson said those policy issues include a decision to have the county act as a leasing agent, continue its contract with Cabaco the current lease management firm, or choose separate management firms that will absorb renovation costs and much of the overall financial risk.

Wilson said he and the other supervisors are aware that some of the current tenants may be paying less than market value and that supervisors--more accustomed to making political rather than business decisions--may defer to hire outside management firms.

Board Examining Lease Potential

“We have a financial baseline and greater understanding of the existing tenants,” Wilson said. “But the current lease situation may not be realizing its potential. We need to go out to bid to find golf course operators or stable operators and see if they could do it at a better cost for the county or continue to have Cabaco doing it.”

Richardson said he will seek the board’s direction next month.

If the county operates the lease, it will have an operating deficit of $7.8 million in its first year. That amount will be offset by $2.8 million in county and federal dollars already set aside.

At the conclusion of the lease’s third year, the county projects a $7.3-million profit. In addition, Richardson’s plan calls for generating $14 million in profit by the fifth year, but he added that most of the funds will be put back into the base to help pay for maintenance.

The projection did not include converting hundreds of homes, dorms and barracks into civilian housing for open market rentals and shelters for the homeless. Wilson and housing advocates have proposed using the base’s housing assets until a reuse plan is approved by supervisors, which could take years.

Part of the proposal is to generate revenue by leasing to a developer who can rehabilitate, market and manage the properties. Additional housing also would be leased to nonprofit agencies to help alleviate the county’s affordable housing crisis by renting to the working poor and homeless.

The biggest obstacle for Wilson’s plan is how to allow people to move to the area but not permit them to vote for annexation to Irvine, which has proposed taking control of the base as a political maneuver to halt the proposed airport. Under state law, as few as 12 residents living in the unincorporated El Toro area could vote to have Irvine annex their neighborhood.