City updates residents on fairgrounds buyout plan

DEL MAR — Sworn to secrecy by Gov. Arnold Schwarzenegger during negotiations, City Council held its first public hearing Oct. 18 to provide an update on the city’s proposal to buy the Del Mar Fairgrounds.
While the majority of the 12 speakers supported the $120 million purchase, at least one resident remains skeptical.
“I can’t help but note … the secrecy of the negotiations, your failure to disclose a coherent business plan and your apparent blindness to the current financial plight of cities and racetracks,” longtime resident and retired reporter Peter Kaye said.
“I can’t help but notice
the unwillingness to provide any details … and the mayor’s reluctance to hold a public vote on this proposal. Right now I’m neither for nor against the fairgrounds purchase but I must say that an old reporter’s skepticism makes me view Del Mar really as little more than a pawn in a big chess game being played up in Sacramento,” Kaye said.
Other residents were more positive. Lynn Gaylord, also a retired journalist, said she was proud of city staff and council members for “sticking with it.”
“I know you guys are not in it for the big bucks,” Gaylord said. “I am thrilled to death that we might have this opportunity.”
“I think it is a watershed event for the city of Del Mar,” Joel Holliday said.
“We are small but we have brains and we can do it,” longtime resident Tensia Trejo said.
Background
In May 2009, Schwarzenegger proposed selling the 340-acre, state-owned site to help balance California’s budget. On July 17, 2009, three days before that proposal was taken off the table, Del Mar sent a letter to the governor expressing interest in buying the facility.
Since then council members discussed the idea during a handful of regular meetings. City officials have met about a dozen times in closed session — a requirement for property negotiations — to discuss the purchase.
County Supervisor Pam Slater-Price sent a letter supporting the city’s actions in 2009.
“This has been anything but a secret process,” Slater-Price said. “The only ones surprised were those not paying attention.”
Purchase details
To proceed with the purchase, the city had to agree to a list of conditions set forth by the governor’s office. Negotiations had to remain confidential and Del Mar would be required to keep the property in the public domain and continue the San Diego County Fair and horse racing.
“We readily agreed to that since we already think that’s what the main purpose of the fairgrounds and the race track should be,” Mayor Richard Earnest said.
Finances
Since news about the purchase began making headlines about two weeks ago, one of the biggest controversies is the $120 million sale price, which was set by the governor based on income the site is generating.
“I think the price is too high because the property, while there’s a lot of acreage, is so environmentally constrained,” said Dwight Worden, a Del Mar resident and environmental attorney.
Barry Nussbaum, fair board president, said he believes the property is worth $800 million to $1 billion.
Del Mar plans to pay for the site by issuing bonds secured by fair and track revenues, borrowing money from the state and cash from a 55-year prepaid lease from a private investment group of horse owners, including part-time Del Mar resident Mike Pegram, who owns Preakness Stakes winner Lookin at Lucky.
Earnest said no city funds will be used for the purchase, nor would money from the fairgrounds go directly to the city. City officials say Del Mar currently receives about $700,000 annually from the fairgrounds, but spends about $2 million to provide services and infrastructure.
They are hoping to better recoup those costs with the purchase.
What will change
The site is currently governed by the 22nd District Agricultural Association and its nine-member, governor-appointed board of directors. The plan is to keep three of the nine members onboard for the first year. A more local nine- to 11-member board, including five members from Del Mar and one from Solana Beach, will then be formed. It cannot include elected officials.
Earnest said the city will retain the “world-class” staff that runs the fair and race track. He also said expansion plans at the site that include a convention center, rooftop sports fields and a 330-room hotel condominium will be eliminated.
Who’s onboard
In addition to Slater-Price, Del Mar has received written or verbal support from state Sen. Christine Kehoe and the cities of San Diego, Carlsbad, Oceanside and Encinitas.
Although neighboring Solana Beach supports local control and eliminating the expansion proposal, most council members have issues with only one seat on the governing board. They also want better mitigation for the negative impacts the site causes to that Solana Beach.
The fair board opposes the sale. Nussbaum said he believes the financing structure “will cause the collapse of the fairgrounds facility.”
“The fairgrounds right now is managed by a board of nine people from around San Diego County that has already established and maintained regional control of this facility,” Nussbaum said. “To transfer it to the smallest city in the county to the exclusion of the other 3 million residents of San Diego County would disenfranchise the input that those people have.”
What’s next
Assembly Bill 181 authorizing the sale was co-crafted by Kehoe and introduced by Assemblywoman Lori Saldaña as a trailer to the budget. As such it required a two-thirds majority vote to pass, but it was pulled. It could be reintroduced by Nov. 30 if the governor calls a special session or next year when the Legislature is back in session. In either scenario, a simple majority vote would be required.
If the bill is approved, the city will continue its due diligence and look at the financial records.
“We are ready, willing and able to open our books, “ Becky Bartling, fairgrounds deputy general manager, said. “We’re concerned about the structure of the financing and how that would impact net revenues.
“We currently have significant deferred maintenance issues and we really want you to see that before you get too involved in the process,” she said. “I would really highly recommend that before the legislative session starts again in January.”

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