Cities expect a boost

Paul Clinton

A blockbuster retail-and-housing project set to open in Costa Mesa

this summer has sparked optimism about that city’s economy, while

Newport Beach leaders say it will be business as usual in their city.

Business and civic leaders in Costa Mesa said they are especially

optimistic about their city’s economic outlook due to the opening of

the Home Ranch project at former lima-bean fields just off the San

Diego Freeway between Harbor Boulevard and Fairview Road.

“We’re positioned very nicely with Home Ranch,” Councilman Gary

Monahan said. “We have a very strong retail presence with South Coast

Plaza having very strong holidays and IKEA coming in [as part of Home

Ranch].”

C.J. Segerstrom & Sons are in the midst of building a large-scale

project that includes housing, office space, a corporate headquarters

for tech bellwether Emulex Corp. and a flagship IKEA store on 90

acres.

The IKEA alone will pump $5 million of sales-tax revenue into the

city’s coffers in its first five years of existence, Segerstrom

spokesman Paul Freeman said. There will be many other economic

benefits as well.

“[The benefits] are substantial,” Freeman said. “They are in the

form of sales tax, property tax and high-paying jobs.”

Civic and business leaders are hoping to build off a year that,

they say, bucked the broader, softer nation and state economies. For

the fiscal year ending June 30, the city saw increases in both

overall sales and property tax revenue, the city’s annual report

shows.

Officials were projecting $34.1 million in sales tax revenue and

$13.4 million in property taxes. When black ink was put to paper, the

city exceeded those projections, pulling in $34.5 million in sales

tax revenue and $13.9 million in property tax revenue.

While those increases were modest, the city’s tourism industry

disappointed expectations, with a 6.67% drop in expectations for

hotel bed-tax revenue. The city collected $3.87 million; it expected

to collect $4.14 million.

Sales tax revenue from the Home Depot, at 2300 Harbor Blvd., and

the Greatland Target, at 3030 Harbor Blvd., bolstered the city’s

retail environment, officials said. Both of those stores opened in

2000.

Questions still remain about the revitalization of the troubled

Triangle Square retail center and a rise in occupancy rates in

commercial buildings near the intersection of Bristol Street and Red

Hill Avenue, but overall 2003 should be a strong year for the city,

said Ed Fawcett, the executive director of the city’s chamber of

commerce.

“We’re going to do great,” Fawcett said. “As far as income from

the private sector, we’re here and we’re strong.”

Calling Triangle Square a “white elephant,” Fawcett said he still

had concerns about whether vacancies there can be filled.

In neighboring Newport Beach, no high-profile development projects

are expected to be built. Officials expect the city’s economy to grow

about 3% in the first six months of the year and about 6% in the

second half.

“We’ll do better in 2003 than we did in 2002,” said Richard

Luehrs, the president of the Newport Beach Chamber of Commerce. “As

long as interest rates stay as they are, there would be indications

that we’ll do well.”

The city is home to many financial services companies, including

many mortgage lenders. With interest rates at historic lows,

companies like Downey Financial Corp., Wells Fargo & Co. -- the No. 1

mortgage lender in the city -- and Bank of America will continue to

lend money fairly cheaply.

That should keep the housing market robust and stimulate job

growth, Luehrs said.

Low rates, which economists say won’t stay low for too much

longer, should also benefit car dealers like Fletcher Jones Motorcars

and others.

City officials are also seeing early indications that the real

estate market is still very strong in town.

During the final six months of 2002, the city came in 15% ahead of

its projections for property tax revenue, pulling in $20.3 million,

and 1.8% ahead of its projections for sales tax, collecting $7.1

million, city financial officer Dan Matusiewicz said.

The city is also 3% ahead in its bed-tax revenue. There are about

300,000 rooms in town.

“I’m hopeful there will be some new jobs here in the next few

months and the customer will feel more comfortable spending money,”

said Councilman Tod Ridgeway, who develops projects in other areas of

the county and state. “I see this as a turning-point year, but for

the $34-billion deficit in Sacramento, which is going to put more

taxes on both the individual and corporations.”

On Friday, Gov. Gray Davis announced he will seek $8.3 billion in

tax hikes to offset the deficit.

* PAUL CLINTON covers the environment, business and politics. He

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

[email protected].