Photo panorama Art Olson
Financial Stars Aligned - Fair Value | Fairgrounds in the Zone
Sam Borgese | 10th Street
As the City Council and City Manager earnestly pursue the options and mechanics on how the City of Del Mar can purchase the 22nd Agricultural District from the State of California residents might want to know if such a purchase is feasible.
Certainly the financial stars are aligned to encourage a serious effort to make such an historic opportunity a reality:
1. The City’s credit rating is very strong as a result of its near zero debt per capita and its proven history of sound fiscal management;
2. The bond markets, the best vehicle for the City to utilize in this purchase, are at near record lows resulting in favorable municipal bond yield rates;
3. The London Interbank Offered Rate (LIBOR), the rate most likely to be used as a basis for any lending required above any municipal bonds, is hovering around 1%;
4. And, institutional and private lenders are very active in lending on projects that have strong credit and collateral; both applicable to the City and its purchase of the Fairgrounds.
All of the above advantages present a viable and fiscally prudent path for the City to arrive at an historic moment of ownership of this extraordinary and important property.
With an excellent credit rating and no debt a significant amount of the purchase funds may be available through the sale of municipal bonds. The payment of the bonds could be supported by the cash flow from the current contracted activities at the Fairgrounds and from the various leases such as the Thoroughbred Club.
The City could solicit offers for a non government agency to purchase some of the sensitive areas of the Fairgrounds property thereby creating a non-reproachable green belt to insulate the sensitive lagoon restoration area from the Fairgrounds while reducing the cost of the purchase.
The Fairground purchase would most likely include the Horse Park property to the east of Interstate 5. This property could be offered to developers under a master ground lease. Under City ownership the development can be controlled to assure flood zone compliance and appropriate integration into the ocean to mountain trail currently being constructed.
Finally, the purchase of the Fairgrounds places the control of the entire property within the planning control of the City of Del Mar. There are further opportunities to offset the risks associated with any loss of income from current Fairground leases and activities following a community involved planning process that would result in the development of the Fairgrounds property with softer uses that drive sustainable income streams while protecting the economic viability and aesthetic values of the Village commercial district.
These development opportunities could create a strong sustainable income stream to service bond obligations or add to the City’s general funds for other City projects or to increase its emergency cash reserves.
There may be vigorous debate about whether or not the City should purchase the Fairgrounds property however the means to complete the purchase are being presented in an usually favorable financial environment to complete a purchase prudently and with the least cost.
This window of favorable financial alignment will not last and once gone the community will lose an invaluable opportunity to control one third of its City. It will also lose, perhaps forever, the opportunity to secure its financial future while protecting its unique position as an oasis of green within an ever encroaching sea of concrete.