Coast money disputes continue

June Casagrande

Newport Coast residents and city officials are in a dispute over

about $43,000 a year in interest income that both parties say is

rightly theirs.

The city will earn an estimated $480,000 a year in interest on a

portion of the $18 million they are reimbursing to Newport Coast

residents as part of their pre-annexation agreement. Some resident

leaders say that a small portion of that should be redistributed to

homeowners, but city officials think the agreement states clearly

that the money can go into the city treasury.

The money originally comes from the Irvine Ranch Water District,

which agreed to pay the city $25 million over a six-year period for

the rights to continue selling water to Newport Coast residents after

annexation, which took place on Jan. 1.

After some wrangling, city leaders agreed to give the money to

homeowners, distributing $18 million to residents over a 15-year

period and setting aside $7 million for a community center. In about

a month, most homeowners there will get the first installment on

their county tax bills -- a credit from $80 to $3,000 this first

year.

While they were working out a way to credit tax bills, city

officials put the $1.2 million first installment into a separate

account, where it sat for about nine months and earned about $43,000

interest. Both sides agree that interest on the larger pot of money

should go to the city, as stated in the agreement. But some Coast

residents say that the city should continue to handle the money the

same way in the future, setting aside the $1.2 million each year in a

separate account about nine months before it will be paid to

residents. The interest that accrues in the interim, they say, should

be reimbursed to homeowners, just as it was this year.

“All we ever asked for is that we reach an agreement that’s fair

for everybody,” said Jim McGee, president of the Newport Coast

Advisory Committee, which represents residents of the area. “This is

a little unfortunate. I hope this can be dealt with in good faith.”

But Asst. City Manager Dave Kiff said that there is nothing in the

pre-annexation agreement that says when the city should move the $1.2

million into the smaller account each year.

“I think the agreement’s very clear,” Kiff said. “We did it really

early this year because we were working out a way to pay it back on

their tax bills. But every successive year beyond this we could do

that the hour before we give it to the county.”

Over the next eight to 10 years, the city will earn about $480,000

a year in interest on the water district money, assuming a rate of

3.5%. That’s because, though the pot will go down each year as the

city pays installments to residents, the water district will continue

to pay into the fund.

The district made its first installment of $15 million in

December. In December 2003, the district will make a $5-million

payment. Then $2 million payments will follow in December 2005 and

December 2007.

After that, the interest earned will begin to diminish rapidly.

* JUNE CASAGRANDE covers Newport Beach. She may be reached at

(949) 574-4232 or e-mail at [email protected].