DEL MAR — Projected costs for utility undergrounding in Del Mar are continuing to go down by millions of dollars, and the projected timeline for the project has decreased by around a decade, staff shared in a financial update to the City Council on Tuesday.
At the City Council meeting, city staff shared an updated cash flow report for the undergrounding program, which is moving power lines throughout the city underground. It is funded by the city’s one-cent Measure Q sales tax, passed in 2016.
The city has completed two phases of work — Tewa Court/10th Street in 2023 and 1A/Stratford Court South last year — and is currently working on District X1A, covering the area of Crest Canyon.
After seeing a spike in project costs in 2024, the city has seen a decrease in overall anticipated costs for the Undergrounding Program. The estimated total project cost has dropped from $105.6 million in November 2024 to $82.7 million in 2026.
Along with lower-than-projected inflation, cost savings are partly due to reduced estimates from San Diego Gas & Electric for their portion of the work. For X1A/Crest Canyon, SDG&E’s estimates started at $4.9 million in 2024 and dropped to $2.8 million as of September.
The city has also received more construction bids for additional undergrounding phases since 2024, which has helped to form cost projections for future phases.
“At the time [in 2024], we were working with a lot less bid information than we are now,” Principal Engineer Martin Boyd said.
Because of this positive trend, the City Council also decided to pursue a smaller amount of debt financing to cover the project. In September, rather than a planned $11 million loan from the California Infrastructure and Economic Development Bank, or IBank, the council approved a $5 million loan.
X1A/Crest Canyon will include the removal of 12,250 linear feet of overhead utility lines and 77 poles along portions of San Dieguito Drive, Oribia Road, and Crest Road. Construction, including work by San Diego Gas & Electric, is expected to finish in early 2027.
All undergrounding phases are also expected to be completed by 2049, 10 years earlier than previously estimated.
The next phase of work will be District 1B/Stratford Court North, with estimated costs decreasing from $5.9 million to $4.6 million, followed by District 2/Beach Colony.
At the council meeting, city leaders also discussed the best way to plan the upcoming phases in order to start construction sooner, achieve the greatest cost savings, and remain flexible to any changes.
For District 2/Beach Colony, staff presented two scenarios to the council — beginning design of a small section along 25th Street as a standalone project first and then designing the entirety of District 2; or grouping them together and then breaking District 2 into two construction phases.
The second scenario would allow the city to start work on 25th Street and in District 2 at the same time, beginning construction in the area much sooner. It would also save the city around $400,000 in reduced inflation for the project, staff said.
The combined cost for 25th Street and District 2 is now estimated at $15.4 million, down from 2025 estimates of over $20 million.
The council — minus Mayor Tracy Martinez, who was recused from the discussion about District 2/Beach Colony due to living in close proximity to the district — agreed on the second option to split it into two phases.
They also directed staff to consider phased construction for future undergrounding districts and to update the finance-as-you-go cash flow analysis to consider additional financing options.
“I’m really glad that we’re where we are today,” said Councilmember Terry Gaasterland. “I see a huge amount of great gain by looking at phased construction.”
Councilmember Dan Quirk asked whether the council could approve a third scenario in which the city completes District 2 as a single non-phased project and does not rely on financing. He argued that based on his own modeling of financial trends, the city will likely not need to use any of the $5 million IBank loan for future phases.
“I don’t think we’re going to have to borrow anything, or it’s going to be a very small amount,” Quirk said.
Assistant City Attorney Christina Cameron said the council could not consider this scenario as an option at Tuesday’s meeting because it was not included as part of the agenda. However, she said the council could choose to go this route in the future.
Councilmember John Spelich said that while trends may look good now, things could take a downturn and the city could see costs rise again.
“To me, these are things that I think, we need to hold two thoughts in our head at one time. Yeah, the modeling looks good … Dan has suggested that it’s gonna get better. It could, but boy, it could get a whole lot worse,” Spelich said.
The next step is for the Undergrounding Program Advisory Committee, or UPAC, and the Finance Committee to consider a framework for financing guidelines for undergrounding.
Quirk recommended that the committees also discuss the city’s maximum debt service capacity for funding undergrounding projects, stating that the city could be borrowing far more.
Martinez said the intent is for the committees to make recommendations to the council, not for the council to tell the committees what to recommend.
“You’re telling them what they should be voting on and that’s not appropriate. You wait until they come back with a recommendation,” Martinez said.
