City refinances Treasure Island park debt

Barbara Diamond

City officials unanimously agreed to refinance the Treasure Island

Park debt, even if they couldn’t agree on how to spend the estimated

$1.2 million saved by reducing the interest rate.

Various city projects and funds were tapped to pay off the $8.1

million owed to Montage Resort developer Athens Group, which had

fronted the park costs. The city was paying 8.1% interest on the

debt, deducted from the resort’s reported bed tax.

City Manager Ken Frank offered three options for refinancing the

debt, but shot down two of them.

He strongly recommended against selling tax-exempt bonds because

the cost of issuing them would reduce the savings to about $500,000.

As for using “idle funds,” Frank said he didn’t want the council to

go that route because the city would not get a clean audit report if

they did.

“The third option [re-appropriating funds from specific projects

and fund balances] is effectively the same thing, using funds that

are just sitting around getting 1.5% interest when we are paying out

8.1% interest,” Frank said.

But it doesn’t affect the audit.

The council voted 4 to 0 to appropriate $5 million from the

Community/Senior Center-Community Clinic project on Third Street;

$400,000 from the Open Space Fund and $800,000 from the Automotive

Replacement Fund; $500,000 from the General Fund Emergency Reserve

and $1 million from the general fund.

“My estimation is that by the end of calendar year 2004, the first

four could be paid back by estimated bed taxes,” Frank said.

He recommended that the bed taxes automatically be appropriated

back to the tapped funds, with the general fund emergency reserve

loan to be repaid first. He also recommended appropriating the

savings from refinancing for the Third Street project.

Councilwoman Elizabeth Pearson, who worked at one time for Laguna

Beach Seniors Inc. to raise funds for the senior center, wanted the

council to guarantee that half of the savings would be allocated to

the project.

“I didn’t want to go to the seniors and say we are delaying the

senior center to pay off the park,” Pearson said. “I don’t think we

should be paying 8.5% on anything. However, if we slow the project

that is their dream, I want it to be beneficial for them.”

Mayor Cheryl Kinsman, who is prohibited by state law from voting

on the Third Street project because she owns property within 500

feet, said she would not favor putting city money into any project

not owned by the city.

The original idea was that Seniors Inc. would raise the funds for

the building and own it. The city was to pay for the underground

garage and use it in off-center hours for paid public parking.

“If the city pays more, it will own more,” Frank said.

Funding for the center has been harder to come by than the seniors

expected. Pearson reported that they have agreed to scale back the

project to a one-story, 8,000-square-foot facility. That is about the

size of the center they could have had at 450 Glenneyre St., a site

many of them preferred, but rejected because they insisted at the

time on a larger building.

Frank said the loan from the center appropriation would not delay

the project.

He also said that no open space purchases were on the table,

responding to an objection by Laguna Greenbelt Inc. to the loan from

the Open Space Fund.

Laguna Greenbelt also objected to putting the $2-million

appropriation for corporation yard relocation on a “do not touch”

list.

“If ever a project needed to be deferred for a year or so, it is

the relocation of the corporation yard to the ACT V parking lot,”

Greenbelt Vice President Wayne Ybarra said.

Frank said that there were not three votes on the council to defer

the relocation and that he had specifically recommended taking money

out of projects that had no start dates.

“This is a risk,” Kinsman said. “We don’t even know if the hotel

is making money. We haven’t seen their books, and we won’t see their

books. Their bed tax was expected to be higher than we have seen.”

Under the agreement with the developer, the park debt was paid by

bed taxes: no bed taxes, no payment. No cash was laid out by the

city.

“There are risks, and there are calculated risks in business,”

Councilman Steve Dicterow said. “I think this is a good one.”

The distribution of the estimated $1.2 million in savings was

tabled when council members could not agree on who would get what.

Pearson held out for $600,000 for the senior center. Councilwoman

Toni Iseman wanted $240,000 for the Community Clinic. Kinsman made a

last-minute pitch for the rest of the $1.2 million savings to go to

the purchase of a new computer system, which had not been included in

the proposal.

“We look like the three stooges,” Dicterow said.

“The fours stooges,” Iseman said.

“We spent hours debating how to allocate the $170,000 community

grants and we are supposed to divide up $1.2 million after 10 minutes

of discussion,” Dicterow went on. “I don’t think so.”

The allocation was tabled.