A project to underground utilities first appeared on a council priority list in 2013, with an estimated cost of $30 million. What followed were task forces, meetings, and a bevy of consultants and related fees.
The project quickly became about more than just undergrounding, but also about traffic flow, canyon beautification and bicycle and pedestrian paths. Through it all, the one constant was utilities would be undergrounded. It started as an objective and ultimately became a necessity for all proposed alternatives.
It’s not clear when the City became aware that the undergrounding that was such a key part of planning couldn’t be accomplished as long as Caltrans owned Laguna Canyon Road. It was first discussed at a January 2024 Council meeting. The discussion centered around a Mark Thomas report dated Oct. 9, 2023, “Caltrans Relinquishment Decision Document.” (Of note, in 2020 State Assemblywoman Cottie Petrie-Norris successfully sponsored a bill to allow Caltrans to relinquish segments of Laguna Canyon Road to the City of Laguna Beach. Presumably, the City was aware of and participated in that effort.) At the 2024 meeting, the Council authorized an initiation letter to Caltrans to begin negotiations for the relinquishment.
The Thomas report explained that the dilemma occurs because Caltrans historically has been unwilling to allow undergrounding in the roadway. However, undergrounding in the canyon outside the roadway may be infeasible due to things such as easements, restrictive covenants and potential eminent domain issues.
The report cited a study conducted by HDR that concluded that acquisition of Laguna Canyon Road by itself wouldn’t provide quantifiable benefits to the City, nor would undergrounding alone provide benefits in excess of expected costs. In fact, HDR suggested it wouldn’t be advisable for the City to proceed with ownership if it didn’t intend to implement significant improvements. This means if the City is to move forward it would likely select from one of four options (costed in 2022 using expected 2024 dollars) with costs ranging from $134 to $140 million.
What’s missing from those numbers is the increased legal liability associated with City ownership of the canyon road. HDR presented a color-coded table that those familiar with risk management would recognize as a heat map. It is a five by five matrix that plots probability of risk on the Y axis and the impact if the risk happens on the X axis (both from very low to very high).
Legal liability is assessed as having a very high probability and a high impact. (In risk management terms it is in the red zone.) The potential claims and settlements related to incidents for which the City might be responsible was estimated at $11 million per year, albeit that estimate is based on overall state highway experience which may differ from actual canyon road experience. Costs could potentially be reduced by eliminating power poles, providing bike and pedestrian paths, and better traffic management plans. And the City does have insurance for amounts in excess of $400,000. However as pointed out in the staff report, large losses would likely increase insurance premiums and perhaps even result in the inability to obtain any insurance.
So where are we? The 2013 dream of undergrounding utilities in the canyon at a cost of $30 million has now become a decision of whether to begin a process to obtain the rights to Laguna Canyon Road and embark on an all-encompassing canyon safety and beautification project that includes traffic flow improvements and bike and pedestrian lanes. The costs for the project are tangible and in the neighborhood of $134-$140 million in today’s dollars, with an added $11 million per year for potential liability risk. The benefits, while real, are more ephemeral and less quantifiable.
The plan was to obtain funding from potential taxes, various government sources, and utility providers. So far, the City has not had much success. Measure P, which would have provided funds from a sales tax increase, was not approved by the voters. Funds based on applications for government grants have not yet materialized, in part based on incomplete engineering and environmental studies. Efforts at the state level to require utility companies to provide funds for undergrounding have not met with success. And the most recent letter from Southern California Edison asking for assistance is not promising.
The City is at a crossroads. After ten years, innumerable meetings, thousands of pages of documentation, and over $10 million dollars spent to date, the City must decide. There may be external sources of funds available. But it is likely some, maybe a significant portion, will have to be sourced locally. This decision has an intergenerational component that should not be taken lightly. To wit, would our kids and grandkids share our dreams, and what would they be willing to pay for them?
Mary Locatelli was a partner at Ernst & Young, an executive vice president and director of audit and compliance at a regional bank, had her own internal controls consulting company, and was a deputy director in management and finance at an international organization headquartered in Vienna, Austria.
