Report: Spending was legal

The city of Newport Beach now knows exactly what happened to nearly $180 million in tax assessments charged to Newport Coast homeowners.

The money’s been spent, in some cases miles away from Newport Coast, and although the disbursements may not seem fair, they appear to be legal, Newport Beach Assistant City Manager Dave Kiff said.

Newport Coast was unincorporated county land in 1987 when officials began approving plans for more than 5,200 homes. The area was annexed to Newport Beach in 2002.

As part of the annexation agreement, city officials promised to explore what happened to residents’ assessment money. It has taken nearly three years because not all the county employees who dealt with the expenditures are still around, and many of the documents that still exist had to be dug out of storage.

A final report on the spending was completed this month by a financial analyst the city hired. It showed that some of the money paid for visible amenities such as streets, sidewalks and parks, as well as the fire station in Newport Coast.

But a few expenditures were head-scratchers for residents ? for instance, partial funding for a library in Laguna Beach and a sheriff’s substation in Aliso Viejo. As Kiff explained it, pitching in on those two projects made some sense at the time because they were the closest facilities to the new homes in a largely undeveloped area.

Jim McGee, a member of a committee that represents Newport Coast residents, said he hasn’t yet read the final report, but all earlier information he received left him with concerns.

“Looking at the draft that led up to the report, I thought there were questions that were still unanswered, information that was not available in a way that was satisfactory to me as a taxpayer, and I continue to believe that the county mismanaged the funds that it was entrusted with in the assessment district pool,” McGee said.

One of the biggest chunks of the money ? $68 million ? paid to build Newport Coast Drive, and that was the subject of residents’ biggest questions, Kiff said.

The road was built to serve future Newport Coast residents. Officials with the county and the Irvine Co., which developed Newport Coast, decided not to ask that the road be designated as a state highway.

With a state highway designation, the state might have paid as much as two-thirds of the cost of building the road, but it looked unlikely that the designation would have been granted, Kiff said.

Nothing can be done about that retroactively.

“You can’t compel someone legally to apply for a grant,” Kiff said.

So residents would be on the hook for Newport Coast Drive. Making that problem even worse, county officials decided to build the San Joaquin Hills toll road, part of which followed the path of Newport Coast Drive.

So the toll road agency paid the assessment district to take over part of the road. But the agency ultimately paid $3.5 million for a stretch of road, which had to be replaced with a new road that cost about $11 million.

The city still plans to have a legal analysis done, and officials are trying to set up a workshop so residents can have questions answered in person.

The upshot of the report is that there’s no way to recover the money now, even if residents still question how it was spent, Kiff said.

“It was probably unfair, but it was clearly legal,” he said.

“I expect there to be grumbling, but it’s pretty hard to take an action from here because of the time that’s gone by, and so far no legal issues have come up?. The money wasn’t wasted or blown on salaries.”

Newport Beach City Councilman Keith Curry, whose district includes part of Newport Coast, agreed with Kiff’s summation. The assessment issue is complex, and it wasn’t helped by getting tied up in the county’s 1994 bankruptcy, Curry said.

“There’s a lot of questions about the whole management of the assessment bonds,” he said, but “the nature of the issues is such that there’s probably always going to be questions.”