Irvine is on course to close the All American Asphalt Plant by November, approving a new bond plan to cover the costs.
City leaders OK’d up to $360 million in bonds to cover the $285 million price tag they set for the plant to cover interest, insurance and other costs, according to city documents.
The larger borrowed amount is necessary, city staffers said during Tuesday’s City Council meeting, to provide flexibility in case of market volatility.
Payments for the bond debt wouldn’t be due for three years, and Irvine residents wouldn’t be on the hook for it, according to city staffers. Instead, Irvine plans to take a parcel of land gifted by the Irvine Company, sell it to property developers and use those funds to pay the debt.
The Gateway Land, a 91-acre parcel of developable land at the corner of Jeffrey Road and Portola Parkway, is worth about $330 million.
The plan is not without risk. If Irvine cannot sell the land for property development, the city uses it for another purpose or the property market becomes too volatile, it would have to find another way to pay back the debt incurred from the bonds.
“If we don’t basically sell the land to developers and allow them to develop on it, then we’re going to have a big problem,” said Councilmember Tammy Kim. “We are only going to be fine if we follow through on the entire deal.”
“If the property isn’t eventually sold for development, then in essence what we’ve done is taken out a loan to purchase the All American Asphalt Plant and that loan will have to be repaid,” said City Manager Oliver Chi. “We have the capacity to do so, but it’s not something that’s currently embedded in our long-term financial plan.”
The council approved up to $360 million in borrowing in a 4-0 vote. Councilmember Mike Carroll was not at the dais when the vote took place.
“I still believe that the potential benefits outweigh the risks,” Kim said.
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In February, Irvine laid out a plan to buy and close the asphalt plant on Jeffrey Road — the focus of increased complaints from residents — and create a Gateway Preserve, an approximately 700-acre open space park with hiking and biking trails.
The land for the Gateway Preserve will include the 11-acre plant site that will be incorporated into the preserve and replaced with a park, a space where visitors can learn about the site and the start of hiking trails. The preserve will also compromise 191 acres dedicated by the Irvine Company as well as city-owned land.
A spokesperson for the Irvine Company was unavailable for comment Wednesday but has previously said: “This is a thoughtful master-planned solution to respond to community requests and we are pleased to support the city in making it a reality.”
The $285 million price tag for the All American Asphalt Plant is “well in excess” of how much plots of land typically go for in Irvine, according to city documents, but the amount is what All American Asphalt was comfortable selling for, Chi previously said.
The first payment of $28.5 million — which is nonrefundable — is expected to be made by the city on June 15, according to a payment plan Irvine officials outlined in April, and the city is on track to make the due date.
The asphalt plant must cease all production activity by Nov. 15 to receive the second payment of $228 million.
Then, escrow is expected to close on Feb. 1, 2024, with Irvine making the final payment of $28.5 million the previous day.
Irvine is set to purchase the asphalt plant “as-is,” according to the city, meaning Irvine will not be able to “perform complete due diligence analysis” or an “in-depth on-site investigation.”
This is because of a 2020 public nuisance lawsuit the city filed against the asphalt plant. The asphalt plant team was concerned Irvine wanted to access to the site to do testing and bolster its case, Chi said; therefore, it was opposed to Irvine assessing the conditions of the land ahead of a sale.
Following the sale, the city will begin environmental reviews and the entitlement process to gain necessary approval for how the land can be used, Chi said, noting he expects the process to take about 18 months. Concurrently, the city will approach private builders about buying the Gateway Land, Chi said.
The bond issuance will cover the cost of an insurance policy — with a cost between $400,000 and $1 million, according to city documents — to cover the city in case there is “a large cost associated with cleanup or mediation” of the asphalt plant site, Chi said.
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