I admit that I had a knee-jerk reaction when I heard that the U.S. Navy planned to auction off the former Marine Corps base at El Toro this coming fall. Auction? It sounded as if military were colluding with big business to divvy up 4,700 acres of prime Orange County real estate that rightly belonged to the local community.
The Pentagon traditionally has not sold its surplus real estate, but has given it to local governments for free in the form of "economic development conveyances." Now, in the case of El Toro, it looked as if the military were getting greedy.
Well, so much for knee-jerk reactions. While it might be hard to convince some of my left-leaning brethren of the case, the forthcoming auction of El Toro will likely benefit the local community, the military and private business, in that order. The City of Irvine, not known to be a pushover on matters relating to the former Marine Corps base, seems just short of ecstatic about the arrangement. The auction is a test case for the military, which has never disposed of an entire base in this way before, although last year it did auction off three portions of the former Tustin Marine Corps Base, also in Orange County.
El Toro has been the subject of perhaps the nastiest base reuse fight anywhere (see CP&DR, April 2002, November 1999, January 1997, July 1996, February 1995; CP&DR Legal Digest, April 2002, January 2002, July 2000). During the early 1990s recession, some Orange County business leaders and politicians decided that the county needed an international airport at El Toro. A number of regional transportation planners agreed. Surrounding cities, among the newest and most affluent in the county, of which Irvine was the largest, strongly opposed the idea. Orange County voters flip-flopped on the airport issue through four ballot measures, but the anti-airport faction ultimately prevailed.
In the most recent initiative, voters in March 2002 designated a 1,500-acre "great park" at the heart of the former base, which will contain a university for 7,800 students, a 200-acre sports park, trails and other amenities. The remaining acreage will go toward 3,500 housing units, including a transit-oriented community, 1.6 million square feet of commercial space and 300,000 square feet of retail. In short, El Toro is an immense city-building project. The area is entirely within Irvine's sphere of influence, and the city is in the process of annexing the site. Orange County LAFCO is expected to decide the application this summer.
The proposed auction divides the immense base into four sections, each of which includes a sizable chunk of the great park and open space. The former base has already been planned, zoned and entitled under a development agreement by the city — a factor that makes the land far more valuable to developers than unzoned land, because it is a "sure thing," that does not require years of negotiation with government for entitlements. But these entitlements are offset by the fact that there is essentially no infrastructure serving the site.
Although Dan Jung, the city's director of strategic programs, would not predict the value of the base, he did cite sales figures of about $1 million per developable acre in the recent auctions at the Tustin base. If the winning bidders pay a similar amount for the developable land at El Toro, that translates to a cool $800 million. In addition, the city plans to charge the developers an additional $200 million in "development agreement" fees, which will go exclusively toward developing the public amenities of the great park. That money, together with an additional $153 million to be raised through assessment districts and special levies, will pay for both infrastructure and park development.
The military, for its part, will have cash in hand to clean up the hazardous substances on the base. To understand the appeal of auctioning the land for the military, one must remember that the original purpose of the Base Realignment and Closure Act was to decrease costs by shedding redundant or surplus property. But the economic conveyance vehicle was not working in many cases for either local government or the Defense Department. Pentagon officials have complained that under the previous system of conveying land to local government, the military has ended up owning the bases for far longer than anticipated because local governments had to find developers interested in redeveloping the bases. Further, the military was not making much money on the deals. At a recent presentation, Wayne Arny, principal assistant secretary to the Navy, said he recently received a check for $51 million from the sale of one of the Tustin parcels. According to Arny, that sum doubled the total return the Navy had received from base closures since the program began in 1983.
The auction process makes base reuse much more like a conventional real estate deal than before. Irvine controlled its destiny, so to speak, by doing a good deal of advance planning. The city identified the land uses it wanted, rezoned the area, and entitled it. As mentioned earlier, this provides certainty to developers, 22 of which have submitted statements of qualifications in anticipation of the auction. The same process of entitlements also provides certainty to the city, which knows exactly what should get built. At the same time, the city avoids the development business, where most cities do not belong.
"We let all three parties play the role they do best," Jung said. "The Navy is the landowner, and in selling they provide an economic return to the taxpayer. The city does what it does best, which is regulate land use through its general plan. The developers do what they do best, which is develop property."
Although it may seem common-sensical, real estate has no value unless it is capitalized, and the auction is one way to capitalize the immense value of El Toro and use the proceeds for public benefits. For some people, the idea of a conventional development process offering the most desirable planning outcome might seem hard to accept. When a city plans properly in the first place, however, the developer ceases to be an adversary and becomes an implementer of the public will. So if your knee continues to jerk, try a calcium pill. Better yet, take a long walk in the Meadow Park soon to materialize just east of the Irvine Spectrum.