A CLOSER LOOK

Noaki Schwartz

To residents here, Newport Center fits that old saying: They can’t live

with it, and they can’t live without it.

The retail and office-space giant is the single largest revenue-generator

for the city, contributing to the basic services on which residents rely

daily.

It houses many of Orange County’s most powerful business-world players --

the Irvine Co., Pacific Life Insurance, Pimco -- as well as beloved,

home-grown businesses such as Ruby’s Restaurants and Steinberg and Moorad

sports attorneys.

But it is also a large generator of traffic -- the latest buzzword in

Newport Beach politics.

This dichotomy has been achieved through the years, as Fashion Island and

Newport Center have grown. Environmental activists and concerned

residents have kept close watch over that growth. In the early 1980s,

opponents threatened a ballot initiative, and in 1986, 58% of voters

defeated a measure to add 1.28 million square feet of commercial space to

the center.But the upcoming Greenlight initiative is an entirely new

animal because it has the potential to forever freeze Newport Center in

its present state.

Three of four Newport Center property owners who had submitted plans for

expansion have pulled out. If Greenlight passes, chances are they will

not reapply.

Trying to stay competitive

Groundbreaking for Newport Center was in 1965 and the retail and office

mecca has grown ever since. More than three decades later, the outdoor

shopping experience of Fashion Island provides 30% of the city’s sales

tax revenue -- a whopping $4.4 million a year.

However, contrary to popular belief, the financial benefits do not come

from Fashion Island alone.

Though many -- including Greenlight proponents -- have argued that office

buildings only cause traffic, Newport Center has a symbiotic relationship

with its commercial half. Nearly 20%, or $700,000, of the retail sales at

Fashion Island come from nearby office workers, according to market

research. Moreover, conferences, events and clients at hotels also bring

in revenue for the city.

The Greenlight measure would require public votes on any new project that

triggers certain thresholds over what the city’s General Plan allows for

traffic, homes and office space. It takes into account changes that have

been made in the past 10 years, which means an area such as Newport

Center that has grown over the years would require public votes for

almost everything.For developers, this extra vote tacked on to an already

long planning process -- that includes numerous studies, and votes by the

Planning Commission and the City Council -- could be perceived as too

risky an undertaking. It would be much cheaper and quicker to take a

proposal to an adjacent city.

If the center can’t grow, the major companies that now have headquarters

in Newport Beach will leave, say business leaders.

It has already started. In the past few years, Price Waterhouse, Quest

Software, Deutsche Bank and Ernst and Young are all examples of

businesses that picked up and went somewhere they could expand.

“[Those businesses] attract other businesses,” said Richard Luehrs,

president of the Chamber of Commerce. “It’s synergistic. Other smaller

firms will want to be closer, leading to increased revenue and property

values going up.”

In addition, with South Coast Plaza and the Shops at Mission Viejo on the

rise, Fashion Island also has to stay competitive. South Coast Plaza does

more than $1 billion in annual sales, dwarfing Fashion Island sales.

“We’re committed to keeping it fresh and exciting,” said Paul Kranhold,

spokesman for the Irvine Co. “To be successful, it can’t be static. If

it’s static it will die. If it looked today like it did in 1970, nobody

would go.”

No room to expand

Last month, Irvine Co. Executive Vice President Gary H. Hunt withdrew

plans for the expansion of Newport Center.

In a letter to Mayor John Noyes, he cited the uncertainties created by

the Greenlight measure as being too risky in an already time-consuming

and expensive city planning process.

The Irvine Co.’s proposal was linked to three other projects all applying

for one general plan amendment. The four property owners had planned to

share the costs of the studies and supporting documents that would have

been about $537,000, said Planning Director Patricia Temple. The Irvine

Co. was supposed to pay 65% of this amount.

The overall plan was to add 1 million square feet of office space and

200,0000 square feet of retail space to Newport Center and Fashion

Island.

The day after the Irvine Co. withdrawal, the California Teachers

Retirement System pulled its proposal for an office building on land it

owns at the center.

And on Feb. 11, Pacific Life, the largest life and health insurance firm

in the state, with headquarters in Newport Center since 1972, yanked its proposal as well.

Unable to expand, the company announced that it was going to move a

quarter of its work force to Foothill Ranch in June.

The proposal included a 420,000-square-foot expansion of the existing

insurance company building. Like the Irvine Co., Pacific Life cited the

slow-growth initiative as the main reason behind the move.

The only project left is the one proposed by the Newport Beach Country

Club, which wants to build 15 homes on its property.

No word yet on the status of those plans.

When each move was announced, different groups around the city

immediately began speculating as to what was responsible for the

withdrawals.

Greenlight, the group of community activists that drafted the measure,

announced their first victory.

Developers have “heeded the message of the 9,000 Newport Beach residents

who signed the petitions,” said Greenlight spokesman Phil Arst.

“They probably just don’t want the hassle,” said proponent Tom Hyans. “If

its a viable project now, it’ll be a viable project later.”

Times they are a changin’

But Vice Mayor Gary Adams raised yet another explanation at a recent

council meeting, when he said the developers probably knew that they

simply couldn’t get enough council votes. Mayor John Noyes agreed. They

both said the Irvine Co. must have realized that the council prefers

retail development over office buildings.

That line of reasoning was not readily disputed by any of the other

council members.

However, it is worth noting that the Newport Center build-out plan was

both initiated and partially crafted by those same city leaders, with the

exceptions of new council members Adams and Tod Ridgeway.

During the recession of the early 1990s, Newport Beach saw firsthand how

important a thriving sales tax base is to the city’s livelihood.

So after recovery in the late 1990s, council members decided they didn’t

want to be in similar situation in the future.

In April 1997, the Newport Center Economic Opportunities committee -- a

subcommittee of the council led by Councilman Dennis O’Neil -- proposed a

mixed-use expansion to a reluctant Irvine Co.

The vision was to keep “the most significant center in Newport Beach”

competitive in the future, O’Neil said at the time.The council quickly

approved the conceptual plan, which called for more hotel space, 200,000

square feet of retail in Fashion Island, 770,000 square feet of new

office space, day-care centers and an affordable senior housing complex

north of the library.

But still stinging from the 1986 defeat of the center’s growth, company

officials said they feared the community would not accept the effort. And

perhaps rightly so. Immediately after the council’s 1997 vote, Allan Beek

-- now a Greenlight proponent -- said “a referendum is always a

possibility.”

The company instead focused on the expansion of the Four Seasons Hotel --

which is underway -- and the senior housing development, which was later

scrapped.

In early 1999, the council raised the issue again, sending out a formal

request for build-out proposals to the Irvine Co. and other property

owners in the center, including Pacific Life.

One year ago, last week, the proposals were submitted and the planning

process was launched. But between then and now, the Traffic Phasing

Ordinance was revamped and the Greenlight petition was placed on the

ballot.

O’Neil now says that the Irvine Co. should have started on the expansion

plans when the idea was first proposed in 1997, but that now it is too

late.

The economic winds have shifted, he said, causing residents to want to

halt growth and focus on quality of life.

The question is, will the city’s leadership ride those changing winds or

continue on their previous path toward economic development?

Only time will tell.