ENCINITAS — The City Council voted unanimously to issue bonds to pay for the Encinitas Community Park and Moonlight Beach improvements despite some lingering objections by residents Wednesday.
The vote was the final step by the council to complete a drawn out process towards financing the projects.
On July 11, the City Council voted unanimously to finance the construction of the Encinitas Community Park and Moonlight Beach improvement projects through a mixture of bonds and reallocation of existing money earmarked for other capital projects.
None of the residents who spoke were in favor of borrowing money for the parks.
Craig Champion said he was generally supportive of the park but said he felt “hoodwinked” by the city because it had led the community to believe there was enough money to develop the former Hall property into a full-scale recreational park.
“I think bonds have their place for things like infrastructure and some school projects,” Champion said, “but not for recreational facilities, those are discretionary.”
Like other speakers, he voiced concern over the implications of carrying an $8 million lease revenue bond debt. “People think bonds are free money,” he said. “But they are far from it.” He urged the council to take a “pay-as-you-go” strategy rather than a financial debt strategy.
Tony Kranz, a city council candidate, called into question the council’s timing. “In 2006 this was a high priority capital project, we’re just now discussing this in 2012,” he said. “There’s an issue of credibility,” he said.
During the July meeting City Manager Gus Vina said staff recommendations for funding met several objectives, including maintaining the city’s good fiscal standing and that it “gets the job done.”
The construction cost for the park came in at $19.3 million after bids were higher than expected recently. Vina told the council that $7.8 million in existing funds would be coupled with $7 million in total reallocation funds, leaving $4.5 million in financing.
The 44-acre site purchased by the city in 2001 has been controversial throughout the various stages of planning. The property is partially surrounded by residential neighborhoods with the eastern edge adjacent to the freeway and its northern border along Santa Fe Drive.
Councilman Jim Bond questioned the legitimacy of the public’s argument against lease revenue bonds for the park construction. “There’s some serious campaigning going on here,” he said. “The council decided to borrow it for you, so you could have one of the best beaches and a park,” he said.
“What we’re trying to do is set Encinitas on the right path,” Bond said after giving a summary of his interpretation of lease revenue bonds.
Councilman Mark Muir said the option before the council was preferable to a general obligation bond which requires the imposition of a tax. “But no such tax exists with the lease revenue bonds,” Muir said.
Mayor Jerome Stocks said the city is in good financial shape and could take on the added debt. “The city of Encinitas’ bond debt ratio is about 8 percent,” he said. “We have historically been a pay-as-you-go thing,” he said. “The problem with that is that you end up with a lot of cans of money and you can’t get anything done.”
Stocks added, “This is a 20-year bond issuance, these amenities are going to serve us for 50 years. That’s a proper investment. I’m in favor of what we’re doing here.”
Vitally important City accounts, such as for open space and habitat acquisition and for dealing with the chronic flooding in Leucadia, the subject of a recent Grand Jury report are being completely unfunded to “redistribute the wealth” of taxpayer dollars from our supposed General Fund “reserves” to help pay for improvements at the former Hall Property and at Moonlight Beach. Most people don’t want SO MANY multi-use fields, although we do support a skatepark and a dog park. Most people don’t feel we should place a parking garage for the lifeguards, at $1.4 Million on our natural bluff at Moonlight Beach.
Also, most people don’t understand that a lease revenue bond, while legal, is to have a “dedicated” stream of revenue that comes in, to cover the lease, (the City is leasing from itself, through a Joint Powers financing authority of the San Dieguito Water District and the City of Encinitas) after the proposed improvement has been constructed. A lease revenue bond is NOT the same as homeowners’ getting mortgages to finance their homes. It’s not like “refinancing,” (as mentioned by outgoing Councilmember Jim Bond) but even when comparing this method of financing to a first mortgage, a homeowner’s real property is used as collateral to insure debt should be guaranteed to be repaid. Lease revenue bonds DO NOT (contrary to Bond’s incorrect analogy) use the finished improvements, or land, as collateral.
The City floated a previous lease revenue bond to pay for the library and new fire stations; we don’t own the land upon which the library sits. The County does. Bond is well aware of this, as he’s pointed it out, at past Council Meetings.
Similarly, the City doesn’t own the land at Moonlight Beach, the State does. While the City may own the former Hall Property, there was another, initial lease revenue bond floated for that, to purchase and construct the property, before.
So we’re on our third lease revenue bond, never allowing the electorate to vote on whether we think it’s prudent to take on more debt, which must be paid for by us taxpayers! While we won’t see the debt for a lease revenue bond on our property tax bills, we do see it in the form of higher taxes and fees, such as fees for doing home improvements, roof repairs, etc. The city raises fees, dramatically, claiming they must, for “back-up costs.”
The land and/or improvements don’t collateralize the bond debt for lease revenue bonds. A revenue stream derived from use and occupancy should, as with those projects which actually generate revenue, such as public parking garages or ball stadiums.
The public should be allowed to vote for general obligation bonds when there is no revenue stream derived from “use and occupancy” other than a public entities General Fund. The City has been putting us more and more into debt and tweaking the facts, trying to “alter history,” by claiming that a majority of citizens supported or now support a regional sports complex, where the soccer leagues would NOT have to pay for using the fields, as they must, currently, when using fields at local schools.
Within the next year or two, the City will have to change its methodology for reporting debt. Because we, like so many other public entities, have massive unfunded pension liability, we will undoubtedly lose our “overly optimistic” Triple A rating, and our debt ratio as compared to the General Fund will be thrown off balance. The City is not being fiscally prudent in trying to win a “popularity” contest in building a regional sports complex and overdeveloping Moonlight Beach, when we cannot afford to “pay as we go.” If the voters genuinely support the improvements as planned, then we would vote for general obligation bonds!
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