The Irvine Facilities Financing Authority in California plans to price $455 million in special tax bonds the week of April 17 to continue development of its Great Park, in pursuit of a long-delayed goal of creating a public space comparable to New York’s Central Park.
The authority, comprised of the Irvine City Council’s members, approved the bond sale during Tuesday’s meeting in a 4-0 vote, with one member absent.
So far, Great Park, part of the redevelopment of the 1300-acre Marine Corps Air Station El Toro that began in 2013, hasn’t lived up to expectations.
Irvine Mayor’s Office
Sports venues were developed, but visions of a public space that rivals Central Park never materialized after the community facilities district for the park was formed a decade ago.
Now city leaders hope to right that. They approved a development framework in July that would bring an aquatics facility, botanical garden, grand promenade, grand meadow, and the Cultural Terrace West, which would add several regional museums. And Tuesday night they approved bonds that would help fund the series of projects.
“The City of Irvine is excited about the Great Park Framework Plan — and all of its amenities — which have been carefully curated and researched,” said Kristina Perrigoue, a city spokesperson. “City staff has spent considerable time developing the first phase in response to extensive community outreach and input.”
More than 500 acres of the former Marine Corps station have been developed into sports fields, an art complex, a hot air balloon ride, and smaller facilities. The bonds would pay for another 300 or so acres to be developed under Phase 1 of the Framework Plan, according to the staff report.
The City Council will review the final plans for Phase 1 on April 11, so it could begin demolition in late April or early May and have the majority of the project completed by 2025, said Irvine Mayor Farrah Kahn.
The momentum that got park plans rolling again last year was the City Council “coming together and urging staff to get a move on things,” Kahn said. “When we heard there was an opportunity to get the funding needed to build out the park and do it in phases as more funding came in, it gave us the catalyst to start planning. Now that we are headed in this direction, it is: What can we build with the money we have now, and what are the funds we can expect to have in years to come?”
Irvine has a Great Park fund that contains funding from its former redevelopment agency. It also receives money from special taxes from the improvement areas associated with the master-planned development of the former Marine station.
Phase 1 includes plans for a Flying Leathernecks Aviation Museum in an existing hangar with aircraft and exhibit materials that would be part of a larger museum, library and cultural center complex.
There are also plans for an Orange County Music and Dance Museum. And Kahn said future plans beyond Phase 1 could include a natural history museum.
Plans to redevelop the existing 12,000-seat temporary amphitheater into a 16,000-seat permanent venue in a joint venture with Live Nation would not be funded by bonds, Perrigoue said. The proposed amphitheater has drawn the most criticism from residents, who have protested everything from the contract with Live Nation to the potential for traffic and concert noise. The only public comment on the project during Tuesday night’s council meeting was about the amphitheater.
The preliminary estimates on the cost of the amphitheater being designed by Gensler are $100 million, but that could change as the design is completed, Kahn said. That project would be paid for by the Great Park Fund and the community facilities district.
The finance authority also approved extending Stifel’s contract as broker-dealer for a year. Rutan & Tucker is bond counsel. Fieldman, Rolapp & Associates is the financial advisor. Stradling, Yocca, Carlson & Rauth is underwriter’s counsel.
The bonds will be issued by the financing authority using the Mark-Roos Local Bond Pooling Act of 1985 to combine the credits into a single issuance. The deal leverages the special taxes from improvement areas 6, 7 and 9.
S&P Global Ratings rates the deal AA-minus.
“Economic fundamentals are characterized by very strong household incomes and robust residential growth spurred by high-performing schools and its position as a key employment hub within the Los Angeles metropolitan area,” S&P analyst Daniel Golliday said in a news release.
The plan is to issue the bonds through the financing authority in three tranches of amounts not to exceed $170 million, $220 million and $65 million in a mix of current interest bonds, which have semi-annual interest payments, and capital appreciation bonds, which have a bullet payment at maturity or at early redemption.
Pooling the bonds will “result in significant savings in interest rates, bond preparation, bond underwriting and bond insurance costs,” said Dahle Boluson, Irvine’s director of administrative services, during the meeting.
The bonds will be repaid with special taxes levied on homes surrounding the Great Park that were put in place when the community facilities district was formed.
“The bonds are secured by special taxes from improvement areas, which are 100 percent built out — 2,285 residential parcels,” Boluson said. “There is no impact to the city’s general fund.”
Though the markets have been volatile over the past year, municipal rates are similar to where they were in October 2022 when the implementation agreement was approved, Boluson said.
“Concerns over regional banks have drawn investors to Treasuries and relatively safe municipal credits,” he said.
The upshot is that the city should land where expected when it prices the bonds in April, he said.
“We are doing really great as far as the properties sold in the city,” Kahn said. “There hasn’t been any sort of a slowdown. I am very confident we won’t have any issues with the bonds.”
City of Irvine
California’s Community Facilities Act, also known as Mello-Roos after the authors of the legislation, was approved in 1982 to allow the formation of special tax districts to finance infrastructure for private development or schools. The concept behind Mello-Roos is that a developer agrees to pay the special tax before the homes are completed, and then passes the obligation to home buyers after the homes are built.
The city formed 11 improvement areas to support bond payments in 2013, but approved in January the addition of an overlay district, designating two new improvement areas to support bond issuance, according to the staff report by City Manager Oliver Chi.
Plans for the Great Park may have been influenced less by the desire for a grand public space than the desire to avoid having the El Toro air station converted into a civilian airport after it closed in 1999.
Special tax bonds totaling $280 million already had been issued for improvement area No. 1 in 2014, improvement Area No. 4 in 2016 and for improvement area No. 8 in 2018 to fund projects.
To prepare for the new bond debt, city council members raised the project’s debt capacity from just over $1 billion to $2 billion earlier this year.
Depending on the development activities, staff expects to return to City Council in July for approval of bonds for improvement area 10 and in late 2023 or early 2024 for approval of bonds for improvement area 11, Boluson said.
“I am really excited about what we were able to plan and will be able to deliver to the community and the region,” Kahn said. “This will be one of the biggest parks on the West Coast.”