Laguna Beach Worries About Payment on Canyon Parcel : Land deal: The $36-million chunk isn’t due until 1995, but officials are concerned--money that could be used for final installment is needed now.

LAGUNA BEACH —  Stripped of critical property tax revenue by the new state budget, Laguna Beach is sounding the alarm and questioning whether the city can still afford a final payment on its treasured $78-million deal to purchase a scenic portion of Laguna Canyon.

Although the final $36-million payment on the canyon is not due until 1995, local officials say the state budget crisis and the continuing economic slump are drying up once-dependable cash streams at a pace that could threaten the land purchase.

So deep have been the state’s raids on local revenue in this small South County enclave that Mayor Robert F. Gentry and other city officials have publicly talked of an array of possible fee and tax increases, including a likely hike in hotel tax levies, to continue providing regular city services.

“We knew all along that this final payment was the biggest,” Gentry said. “Now, I really have my doubts. One alternative is that we give this portion (189 acres) back to the Irvine Co. so they can build 1,600 homes on it. Another alternative is that we renegotiate to buy some more time. I don’t know.”

With the governor already forecasting a gloomy financial picture for California’s immediate future, City Manager Kenneth C. Frank said local revenue sources that could have been diverted to the land purchase may now have to plug holes created by state cuts.

Before the budget crisis, for example, local officials were hoping that a possible increase in the local hotel occupancy tax--from 8% to 10%--could be used to pick up needed cash for the fifth-year payment.

Now, that tax hike will probably be needed to make up for this year’s loss of $711,000 in property taxes to the state.

Also gone is the possibility of a share in a statewide parks bond issue because state officials failed to place the issue on the upcoming November ballot. Frank had hoped that the city could get $5 million to $10 million from such a ballot measure.

“I don’t know how we’re going to deal with it yet,” Frank said. “We have some time to work on it. . . . Who knows what could happen to the economy in the next few years.”

For now, time is both an enemy and ally for those responsible for meeting the payment schedule with the landowner, the Irvine Co. Enough funds have already been committed to meet demands through 1994, which secures the first four parcels in the 1,592-acre agreement.

State budget cuts apparently will not jeopardize the annual $2.5-million contribution from the county’s Department of Harbors, Beaches and Parks. Those payments will continue through 1994 for a total contribution of $10 million and will provide a bulk of the funds necessary to meet the yearly obligations. The county’s agreement, however, does not extend to the fifth year.

“We put the money away in a nice, safe place,” said Robert Fisher, executive director of the county department. “We’re still assessing the impact of the state action, but there is no doubt we have the $10 million.”

The heavy concern now expressed by Laguna Beach leaders stands in contrast to the giddy atmosphere of just more than a year ago when city officials and environmentalists were celebrating the historic agreement to buy a portion of Laguna Canyon from the Irvine Co.

Approval of the deal preserved one of the last undeveloped coastal canyons in Southern California. The purchase effectively blocked the development giant’s plan to build 3,200 homes on the site.

The purchase plan was also strongly supported by local residents, who in November, 1990, overwhelmingly approved a $20-million bond issue that provided the lion’s share of the city’s down payment.

In the aftermath, the Laguna Canyon Foundation was formed as a fund-raising arm for the city and has been attempting to cultivate private and government donations to complete the purchase. So far, $580,000 has been raised in private contributions.

“I would be irresponsible if I was not concerned,” foundation president Michael Pinto said. “The acquisition of Laguna Laurel was a wish to begin with, an act of faith of hundreds and hundreds of people. With the state budget in a state of crisis and the recession, it gives one pause. But I’m confident we’ll be successful.”

He said the foundation has been working with the staff of Rep. Christopher Cox (R-Newport Beach) on an application for about $20 million from the federal Department of Interior’s Land, Water and Conservation Fund.

Pinto said foundation members will be scouring other federal agencies for available funds, as well.

“If one door is closed in our face, we’re looking for two more doors to open,” Pinto said. “It’s Bob Gentry’s job to worry. It’s our job to rouse the troops. If the will is there, miracles will happen.”

Irvine Co. officials could not be reached for comment, but Paul Freeman, who worked as a liaison among the parties to the land negotiations and was paid by the development company, said there is legitimate Angst circulating through the city and contingency plans are being formulated.

Of the local fund-raising efforts, Freeman said foundation members, although “instrumental” in making the land purchase, have not necessarily demonstrated the same ability as high-powered fund-raisers. In April, 1991, foundation officials announced that they had hoped to have raised $1 million by the end of June, the same year.

‘The people appointed to the board . . . may be incapable of contributing or raising major dollars,” Freeman said.

Freeman said he would attempt to bring both parties to the land deal together after the election in November to discuss ways in which the canyon’s open space could be preserved should the city falter on their payment. He declined, however, to provide details about the proposal.

“Until the money is in hand, it’s as serious as a heart attack,” Freeman said.

“In a way, the presence of a real imminent threat might be good for fund raising. Some people might be seeing this as something they won’t have to worry about for two or three years down the line. But it is now.”

$36-Million Balloon

Through 1994, Laguna Beach officials can depend on the Orange County Department of Harbors, Beaches and Parks to kick in $2.5 million each year toward the phased land purchase. But with the continued economic slump and state budget problems, a primary source of funds for the massive final payment has not been found:

Laguna Canyon Payment Schedule

Year Amount Acres 1991 $33 million 1,286 1992 $ 3 million 26 1993 $ 4 million 50 1994 $ 5 million 41 1995 * $36 million 189

* Includes about $3 million in interest

Source: Laguna Canyon Foundation