City expects to profit from annexation

Paul Clinton

NEWPORT BEACH -- Annexation is setting up to be a profitable endeavor

for the city.

Newport Beach stands to make an $11-million profit during the first

six months of 2002 as a result of annexing Newport Coast, according to a

city fiscal analysis released last month.

Newport Beach would fall into the red in the next two years if the

city pulls in Bay Knolls and the eastern half of Santa Ana Heights.

But after that period, profits of between $2 million and $5 million

are projected for succeeding years.

As the city completes the annexations -- all three areas are expected

to be inside city boundaries by mid-2002 -- revenues would fluctuate

because of various lump-sum payments and the high cost of putting in

sidewalks, lighting and other basic infrastructure.

Members of the City Council reiterated their support for annexing the

collection of gated communities of Newport Coast at Tuesday’s meeting.

“There will be a net gain,” Councilman Dennis O’Neil said. “The area

pays for itself.”

Newport Beach has agreed to take in the 190 dwelling units of Bay

Knolls and 460 units in Santa Ana Heights, even though those areas are

considered money losers.

Cities typically agree to take in unincorporated areas that can

generate a steady stream of property tax revenue. In Newport Beach, the

county returns to the city 17% of the amount it collects.

The county has agreed to hand the city 16% of the money collected from

Newport Coast, an area expected to nearly double in size over the next

four years.

The area is proving a rich treasure trove for the city because the

houses there are high-priced. Assistant City Manager Dave Kiff estimated

the average home at about $750,000.

Annexation of Newport Coast is expected to be finalized by Jan. 1.

During the first six months of 2002, the city is expected to collect

$2.08 million in property tax revenue.

The city will also collect a lump-sum $15-million payment from the

Irvine Ranch Water District. In Jan. 2000, the district agreed to pay the

city $25 million by 2007 to continue water and sewer service in the area.

The city has budgeted $1.34 million for police and $1.58 million for fire services during that period -- the two largest expenses.

During the next two fiscal years - 2002-03 and 2003-04 -- the city is

expected to lose $3.87 million and $317,000, respectively.

Revenue from Bay Knolls during those years is expected to be $69,313

and $71,045, compared with $4.79 million and $5.51 million from Newport

Coast. Santa Ana Heights is expected to bring in $73,866 and $75,713 for

those years.

The city can’t tap into the full value of the tax increment because

those two communities are redevelopment zones. A large chunk of the money

is tied up to repay county redevelopment bonds.

Critics of the city’s bid to annex the coast, notably Greenlight

advocate Allan Beek, have said the city has steam-rolled it through the

pipeline.

“It was all a done deal,” Beek said Tuesday. “There was never any

point where there was a question.”

* Paul Clinton covers the environment and John Wayne Airport. He may

be reached at (949) 764-4330 or by e-mail ato7

[email protected] .