Mission Viejo Gets Over Sticker Shock, OKs Car Dealer Pact

The Audis are coming to Mission Viejo. But hardly anyone, including the Audi dealer, is smiling after the City Council last week grudgingly approved a redevelopment project that helps the dealership move into town.

While stressing their objections to redevelopment, which they call a form of “corporate welfare,” Council Members Patricia Kelley and John Paul Ledesma reversed previous votes to join in approving a deal to help the business by giving it a share of the sales tax it generates, up to $600,000 over nine years. The money is an incentive for the business to build in Mission Viejo, improving an aging business district and increasing tax revenue.

Kelley and Ledesma ran for office in a bruising election last fall with the support of a citizens group that opposes what it calls overspending at City Hall and business handouts. But in the end, Kelley and Ledesma backed off their opposition to the Audi dealership, saying they voted for the project because they had saved the city $1.5 million by driving a tougher bargain with Audi dealers Scott and Matt Gunderson.

“Six hundred thousand dollars is more than I’m comfortable with, but substantially lower than the earlier deal,” Kelley said. “I’m not a flip-flopper. I helped to work out a better deal for our citizens.”

The redevelopment deal has dominated city politics in recent weeks as the council twice rejected and then approved terms to help the Gunderson brothers build their Audi dealership on 2.4 acres on Marguerite Parkway near several other car dealerships.

Supporters argue the Audi redevelopment project will funnel millions of tax dollars into city and school district coffers at a time when it is sorely needed. City leaders are facing $2 million in budget cuts this year.

Mission Viejo has entered into tax revenue-sharing agreements with other auto dealerships in that area with incentives ranging from $150,000 to $2 million. City Manager Dan Joseph said redevelopment projects will account for about $6 million of the city’s nearly $13 million in sales tax revenue this year.

But those deals were worked out with the previous council. The new majority, composed of Gail Reavis, Kelley and Ledesma, helped defeat Audi proposals in May and June. In the second decision, Councilmen William S. Craycraft and Lance MacLean cast the only votes in support of the deal, which would have rebated to the dealership $2.1 million of the city’s sales tax revenue from the business over nine years.

But with each passing day, questions and anger over the council’s rebuff of the deal grew. In the last few weeks, members of the business community, PTA board presidents and citizens have circulated petitions and signed resolutions urging the three council members who rejected the deal to reconsider.

Capistrano Unified School District officials also argued in favor of the deal, saying it would mean up to $1.2 million for Mission Viejo schools, which get a percentage of property tax revenue generated in the city.

Last week, Kelley called a closed-door session to discuss another Audi proposal. During that meeting, the council formulated a counteroffer, which the Gundersons -- and, ultimately, Kelley and Ledesma -- approved.

Ledesma, who has called redevelopment a form of socialism, appeared deeply conflicted as he explained his vote Monday night to his constituents, including members of the Committee for Integrity in Government, a citizens group that helped elect him to a second term in November.

“This a difficult decision,” Ledesma said. “Interfering in the marketplace is not the best public policy. But I realize we’re in a position where we’ve grown dependent on sales tax revenue. This is the most innocuous, least harmful deal we could come up with. It is a reasonable compromise.”

Neither of the Gundersons was particularly happy. As he walked out of the council chamber, Matt Gunderson tried his best to force a smile.

“It’s a victory for the residents of Mission Viejo, but this is definitely bittersweet,” Gunderson said. “I believe we were misled by this council. As late as January and May, I was being told by the council to go ahead with the project.”

Members of the Committee for Integrity in Government, which has crusaded against redevelopment, were pleased.

“Numbers drive my thought process,” said committee member Joe Holtzman. “Not dogma and emotion. This is a win-win.”

Kathy Schlict gave her support but issued a warning.

“This is risk-free for the city, and it’s a victory for the residents,” Schlict said. “But I hope the council receives the message that the city opposes corporate welfare.”

Reavis, whose campaign was also backed by the committee, was the lone dissenter.

“I ran against redevelopment,” she said. “My moral conscience says no.”