DEL MAR — The city of Del Mar is exploring new ways to finance the next two stages of its utility undergrounding project to prevent construction delays after seeing costs unexpectedly skyrocket last year.
Del Mar passed its one-cent sales tax Measure Q in 2016, intending to fund the construction of utility undergrounding. Those funds covered the first two of eight planned undergrounding districts. Tewa Court/10th Street was completed in 2023, and District 1A covering Crest Canyon is expected to be completed in March.
After seeing construction and SDG&E costs nearly double over the past year, the city was just able to fund District 1A without issuing debt. Now, Del Mar is facing a shortage of funds for its next two phases — District X1A covering Crest Canyon and District 1B covering Stratford Court North.
Those two districts are estimated to cost around $23.3 million, with $17 million currently unfunded.
At a Feb. 2 meeting, the City Council heard several options from financial planning firm NHA Advisors LLC regarding possibilities for taking out loans, waiting to pay for the subsequent phases until more Measure Q funds come in, or a mix of both.
The City Council directed staff to pursue debt financing via the California Infrastructure and Economic Development Bank (IBank) to pay for District X1A and examine the possibility of financing District 1B. More details will be brought back for approval in the coming months.
“You’re not locking in a term, a rate, a dollar amount, or anything at this point,” said City Manager Ashley Jones. “Before you sign on the dotted line, you’re gonna really understand how much you need to borrow.”
The design for District X1A/Crest Canyon is nearly finalized, with the city expecting to be able to grant a construction bid by July. SDG&E recently gave a pre-bid cost estimate of $4.88 million for the project, which Jones said is better than the city’s estimate of $5.54 million.
District 1B is still midway through the design phase, with construction not likely to begin until 2026 at the earliest. To prevent spending more money on designs and studies that may need redone, the city will temporarily stop work on District 1B until they determine how to finance the project.
If the city does not take out a loan to finance 1B, the project would effectively be delayed by two years, according to a staff report.
“If you want to stay on the current timing, you need to finance them together,” Jones said.
At this time, the balance of the Measure Q fund is expected to drain to around $500,000 by the summer, and the city is also still paying off the undergrounding of District 1A.
Several residents spoke during public comment and emailed comments about the urgent need to complete undergrounding to prevent fire risk, especially in the Crest Canyon area. A letter signed by 62 residents urged the city to pursue new financing options.
“As residents of Crest Canyon, Crest Road and the adjacent streets within Utilities Undergrounding District (UUD) X1A, we urge you to please move forward with borrowing the funds necessary to ensure that our utilities in these critical areas can be undergrounded as soon as possible,” the letter stated. “Like many areas of Southern California, we may not be able to eliminate our fire risk. However, it is clear that we need to exercise greater vigilance, and move as quickly as we can to reduce the risks we can.”
Work on District 1A will replace 56 utility poles and 7,650 linear feet of overhead cables with underground lines along Stratford Court between 4th and 12th streets.
While originally budgeted at $5.4 million, costs for the project quickly grew to over $10 million last year due to unexpected increases in SDG&E costs and high construction bids.
Quirk lawsuit, investigation
In the midst of financing concerns, Councilmember Dan Quirk has threatened to sue the city for not providing more detailed financial information regarding key costs for undergrounding.
In the past, Quirk has pushed repeatedly to see line-item costs for materials versus labor when it comes to undergrounding and other projects, and openly speculated that the city is paying more than it should. City staff have said that these cost breakdowns are not available because the city utilizes lump-sum bids for projects.
City Attorney Leslie Devaney informed the rest of the council that Quirk had stated an intention to sue, which Quirk confirmed later in the meeting, and she urged other council members not to engage with him on this topic.
“The city has repeatedly responded that the city is not in possession of the information requested,” Devaney said.
In response to Quirk’s requests, Jones said the city has asked SDG&E to provide more clarification around line-item costs, especially considering the spike in expenses for undergrounding. However, she said that utility companies are not legally required to provide this kind of breakdown for materials.
At the end of the discussion, Quirk asked if any other council members would support his idea of bringing back a discussion around material versus labor costs for undergrounding. No other council members agreed.
“I think pending your lawsuit against the city, it’s a prudent decision not to move forward on it at this time,” said Councilmember John Spelich.
The agenda for the Feb. 2 meeting also included an item to reaffirm the results of a 2024 investigation into Quirk, which found that he violated multiple city policies in his treatment of the city manager and staff.
A staff report stated that Quirk sent out misinformation about the investigation process via community “e-blast” emails in December. In these emails, Quirk noted that there was an initial investigation that exonerated him of any wrongdoing and that the city terminated the investigation and began a new one to get the outcome they wanted.
Staff stated that there was an initial investigation, and that an executive summary of the resulting report reviewed by the City Council and Jones found multiple areas of wrongdoing by Quirk. However, the city said this investigator was unable to complete the report, so the city began a process with a new investigator that was ultimately completed in February 2024.
“Due to the initial investigator’s inability to complete the report, the City was not charged for this work; a new, independent investigation began and completed, and resulted in a final investigative report,” a staff report said.
Council members Tracy Martinez and John Spelich voted to reaffirm the investigation results. Quirk left the meeting before the item began, and Mayor Terry Gaasterland abstained, arguing that the item should be continued to another day due to the meeting already going past 9 p.m.
