Category Archives: Del Mar Times

Del Mar City Council explores options to retire Shores debt

By Halie Johnson | Del Mar Times

The city manager’s office on Monday presented several options for the council and community to consider in retiring the remaining loan debt for the 5.3-acre Shores property.

The remaining balance is $3.245 million of the $3.673 million the city borrowed to pay for the property.

The Friends of the Del Mar Parks have raised $5.46 million so far, Barbara Mandel Pache, who heads the Campaignfor the Del Mar Shores, said at Monday night’s City Council meeting.

The Friends contributed $30,000, enabling the city to pay the payment due on the loan at the end of the 2008-09 fiscal year. Another $15,000 remains to put toward the Aug. 13 payment of $28,944.

“We’re confident we’ll be able to bring the rest of that money to you,” Mandel-Pache said.
She said the Lobster and Wine Festival on July 18 raised approximately $24,000 for the campaign through the auction alone.

Assistant City Manager Mark Delin detailed the options his office faces and asked for city direction.

The council struck down any possibilities that required using money from the general fund, which Delin said could not support the debt service. The possibilities included renegotiating the loan terms with Union Bank of California or looking into a lease revenue bond.

“It is very difficult to finance this and do anything meaningful with our capital programs,” Delin said.

He also said the city could put a general obligation bond on the ballot. It would require a two-thirds vote, but would offer the lowest possible interest rates.

The council and residents who submitted their comments seemed to favor this option, although the council was hesitant to take the other ideas off the table.

Delin said there are other ways to generate revenue to pay the debt by looking at city assets, such as the Balboa property and the possibility of selling or leasing a portion, not used by the Winston School, of the Shores property.

Delin also discussed selling other unused city properties that lack potential for future use.

“You need immediately to take off the table the idea of selling any portion of the (Shores) property,” Laura DeMarco said during the public comment period.

“The Winston community would be very concerned if an RFP went out on the land,” Mark Peterson told the council.

And Linda Castile, who teaches at the Winston School, urged the city to complete a long-term lease with the school.

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District receives Shores payment

By Jim Kerr, Staff Writer | Del Mar Times

City bank loan source of funding
Closing another chapter in a long saga, the city of Del Mar on Nov. 13, wired a $3.6 million payment to the Del Mar Union School District that completes obligations on an $8.5 million purchase of the district’s Ninth Street or Shores property.

Earlier in the day, the city also closed financing on a three-year, $3.8 million dollar loan with Union Bank of California to cover the payment.

The Shores story is not quite complete though. City officials still expect that community organizers with Friends of Del Mar Parks will continue to raise funds to reimburse the city for its loan. The group will now have up to three years to do so.

“This has been an odyssey,” Deputy Mayor Crystal Crawford said. “But we (council) knew all along that raising $8.5 million was the largest undertaking this city has done by far. We knew from the beginning that fundraisers had a challenge, as did they. But we felt in the long term, the purchase of this last remaining open space was important.”

Crawford said she had every expectation fundraisers would succeed. If that was not the case, she said the city might consider going to voters with a bond measure. The next available general election for such a measure would be 2010.

Saving a park
Issues surrounding the Shores purchase are by now familiar to Del Mar residents.
After the school district declared the 5.3 acres as surplus property over two years ago, a groundswell of community support arose to save the site from a sale to the highest bidder.

Containing open space areas including a baseball field used by Little Leaguers and dog enthusiasts and the Winston School for students with learning challenges, the site became the focus of intensive negotiations between the city and the district.

They culminated in June 2007, with a purchase agreement made under the assumption that all monies would come from fundraising.

In May, faced with the possibility that the Friends group might miss a payment deadline and $3.5 million still owing, the City Council authorized a promissory note with the district.

Another fundraising shortfall culminated with this month’s bank loan.

“At the end of the day the level of risk was worth getting this property,” Del Mar City Councilman Richard Earnest said. “While I don’t like to borrow money, especially in this environment, this was crucial. This was a very good investment.”

Good business
At the Nov. 10 City Council meeting where details of the bank loan were finalized, council members continued to emphasize that the loan, made in a less than optimal credit world, made good business sense. The loan was repeatedly characterized as simply refinancing a debt.

Mayor Dave Druker reminded the public that the promissory note had an interest rate of about 5 percent, while the Union Bank loan was fixed for one-year at a 3.06 percent LIBOR rate.

“We are trading one debt for a smaller interest rate,” he said. “I think we can make an argument that this is a prudent financial decision.”

Creative financing
A new wrinkle in the loan deal, revealed at that meeting, has the city participating in a rather complicated lease/lease-back arrangement.

Under its terms, a portion of its Public Works yard is being leased to a nonprofit financing corporation, the Public Property Financing Corp. of California, which will then sublease the property back to the city. The city in turn will pay rent on the property and under an assignment agreement the rents will then be redirected to Union Bank.

For participating in the lease, Public Property Financing will make about $5,000.

The leasing scenario is a common way of avoiding California constitutional limitations that preclude cities or other governmental entities from entering into multiyear payment agreements and incurring too much debt. Lease/lease-backs are often used by school districts to fund school construction projects, such as when the city purchased the Del Mar Library and Powerhouse Community Center properties.

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Shores fundraising not over yet

By Jim Kerr | Del Mar Times

Officials with the Friends of Del Mar Parks say they are concerned that residents may think their help isn’t needed to finish paying for the Del Mar Shores property.

Joe Sullivan, the group’s co-chair said that since the city agreed to buy the old school property from the Del Mar Union School district, there has been some confusion in the community.

“I know there are people out there who think, ‘OK, the city came in, that’s done.'” It’s not so, he said, noting that more than $3 million still must be raised.

The city’s $3.5 million loan, approved by the City Council three months ago, only removed time constraints imposed by the school district on completing the $8.5 million deal for the 5.3 acres in a largely residential area of Del Mar.

The city does not have the funds to pay off the debt and has always expected the community to cover it. Included in the agreement is a provision that if the city does not make payments on the note, the property will revert to the school district. In addition, payments already made will not be refunded if that happens.

Fundraisers, including those from the property’s Winston School, the private school for students with learning differences, had met two previous benchmark payments as part of an original July 2007 deal between the city and the district. But they came up short on a final February 2008 deadline by $3.5 million. In May, after several extensions of escrow by the school district, the City Council stepped in and closed escrow through a promissory note guaranteeing the remainder of the funds.

“It was a huge undertaking,” said Sullivan of the original fundraising task. “No one in Del Mar had ever tried to raise that kind of money. The May vote by the council was a vote of confidence toward us. We haven’t reached the goal yet but we have the capacity. I’m confident we will get it done.”

In total, the Friends of Del Mar Parks in conjunction with the Winston School have raised just over $5.15 million dollars towards the $8.5 million purchase price. Since the close of escrow in May to July 21, they have raised about $50,000. In November, the city is expected to make a $500,000 loan repayment and each month thereafter deposit another $500,000 until May 15, 2009. The payments include accrued interest on the loan.

With less than 100 days before the first repayment, Del Mar city officials have expressed some degree of angst, over the schedule, and have requested that fundraisers present regular monthly status reports to the City Council. The city says the reports are essential, so that if sufficient funds cannot be raised; the city has a plan to effectively manage any potential situation.

At a previous City Council meeting, several worst-case scenario options were floated by the city to address any funding shortfalls, which might trigger a default on the loan. They included additional interim financing, selling a section of the Shores property not occupied by the Winston School, exchanging the city-own Balboa property land for an equivalent portion of the Shores property and liquidating the Balboa lot, and relocating City Hall to the school district’s administrative office site on the Shores property and selling the current City Hall property.

When contacted last week, Del Mar City Manager Karen Brust, said several of those options still remain on the table but indicated she was seriously considering going ahead with interim financing options such as a commercial paper program or short-term notes.

Brust said she any such financing would most likely involve rolling the Shores debt into a package that also included funds for other capital projects such as the new lifeguard safety center and a new 21st Street pump station.

Historically, the City Council has been reticent to carry a large debt load, but as a result, the city has one of the better credit ratings of county cities.

‘There’s no doubt the city’s position is to not default on the loan she said. “We have our eyes on the ball. I have the best hopes for this. I’ve seen the commitment of this community to make wonderful things happen.”

Sullivan says it is still possible for any large corporate or individual donor to have naming rights for the Shores property, at a price of $3 million. Also Friends of Del Mar Parks will soon become their own 501c3, previously having raised funds under the nonprofit status of the Winston School. Sullivan says that will greatly help the organization in moving forward.

“I’m not really concerned,” he said. “There is a large group of people in this community who are philanthropic by nature and they will support this.”

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