Despite a recent change for the better and nearly two years of formal discussion and negotiation with homeowner representatives, the Encinitas Ranch Golf Authority (ERGA) continues to take actions that put more holes in taxpayers’ pockets than exist on the links themselves.
During this time, what has become evident is that ERGA’s apparently under-motivated “rubber-stamp” Board operates with a lack of openness and transparency. What is arguably the city’s greatest asset — the golf course — requires:
• new and vibrant ERGA leadership;
• adoption of formal transparent operating procedures;
• production of fact-based, detailed operation reports;
• provision for regular rotation of Board members and term limits; and
• analysis of golf course land value at the time it was transferred to ERGA, the total compensation due the developer for the land; and the amount paid the developer directly or in lieu to date.
These recommendations derive from an issue that arose a little over two years ago, when a Coast News Community Commentary warned that nearly 1,000 property owners in Encinitas Ranch would be facing a Mello-Roos/Community Finance District (CFD) tax increase, because the Encinitas City Council voted to allow the ERGA to create an ill-defined “contingency fund” before paying its the CFD bond debt. Last year, the City Council acted to indirectly increase that burden again by authorizing ERGA to add an additional $1 million in bond indebtedness.
Public agencies are forbidden by State law from making a gift of public funds to a private party. Yet, the agreements pertaining to the golf course appear to have been crafted in a manner that fails to ensure adherence to that requirement. Here is why this is wrong:
1. ERGA, which in essence is 50 percent privately owned, is avoiding payment of its fair share of the costs to construct vehicle access to the course.
2. ERGA has written-off approximately $750,000 of its obligation and, as a result of the two recent City Council actions, will likely avoid paying more of its debt in the future.
3. To our knowledge, no other municipal golf course in California, and likely the United States, is operated by a public/private ownership entity where the private entity receives profits. The city should have just paid the developer for its land from golf course profits and not become entangled in this murky arrangement.
4. The developer’s receipt of golf course profits appears to have been granted in exchange for the land under the golf course. Depending on the value, any excess developer compensation could be seen as a gift of public funds.
5. Underlying agreements between the city and the developer allow the developer to delay repaying a retail tax loan and avoid payment of portions of its bond debt obligation.
6. While ERGA recently refinanced the bond debt it incurred to construct the course, it chose a maturity date of only 18 instead of 30 years. This action defies prudent business principals, causes the golf course to pay higher annual debt payments, and increases the likelihood that the bond debt obligation will never be fully repaid.
7. As part of its refinancing, ERGA has drawn-down an additional $1 million in bond debt in order to fund much needed course improvements. Despite warnings at the beginning of the process to properly husband the money, ERGA recently approved the deletion or delay of several program improvements without explanation as to why or the impact.
8. The city and ERGA share a single city department charged with oversight of city and ERGA finances, as well as the bond repayments, thus creating the appearance of a potential conflict of interest.
9. ERGA appears to pay the course management firm higher than industry standards and has further reduced any incentive for the firm to implement cost saving measures by granting it an unprecedented second 10-year operating agreement.
10. Despite repeated requests by the public for ERGA to implement reasonable measures to improve course profits, ERGA refused to consider the vast majority of them. As a result, ERGA has failed to ensure that its actions result in the residents of Encinitas receiving all of the benefits that should have and will accrue from golf operations.
At its upcoming hearing and in the future, the City Council should reconsider how the golf course authority operates and conduct the necessary analysis to ensure no person or entity has obtained or will obtain undue
James Greco, a resident of Encinitas Ranch, represented public entities for ten years and private developers for almost 25 years as a government aide, redevelopment executive, and land use planner. He notes that he is a supporter of the building industry and commends the landowners and developers responsible for the construction of Encinitas Ranch.
Filed Under: Community Commentary