ENCINITAS — Encinitas is looking into borrowing $30 million to finance its long planned and much anticipated Leucadia Streetscape project, which will revamp a 2.5-mile section of Coast Highway 101.
City Finance Director and Treasurer Teresa McBroome told the City Council at its Dec. 18 meeting that Encinitas has the highest credit rating available — AAA and AA+ — and should be approved for a 30-year loan with a 3% interest rate to fund the project.
The council voted unanimously to direct the city manager to submit a loan application to an agency called California Infrastructure and Economic Development Bank, commonly referred to as IBank. The bank is a state agency that provides low-cost financing to other government agencies for a wide range of infrastructure projects.
“It was mentioned that this is a great interest rate, I think we need to take advantage of that now,” Councilwoman Kellie Shay Hinze said before the vote.
Hinze also said because the project could possibly be funded through IBank, and not through a bond measure, it adds flexibility for the city to be able to use some of the funds for other projects.
“This doesn’t preclude us from other investments that we want to make in our city,” Hinze said. “My hope is that we can recruit more grant funds for Streetscape and, as we do that, this money is flexible and that we can advance other projects that we hope to see, including rail crossings (and) a quiet zone.”
The Leucadia Streetscape project has been in the works for more than a decade and will include six roundabouts between A Street and La Costa Avenue, bike lanes, pedestrian paths, wider sidewalks and crosswalks, more parking and the planting of about 1,000 trees.
The project is currently estimated at $28 million.
McBroome said that Encinitas is currently making debt payments of $3.5 million a year on previous major construction projects, including Encinitas Community Park, the Encinitas Library and Pacific View Elementary School. The Streetscape loan would add $1.6 million a year to their payments for the next 10 years.
She said the city should have no problem meeting that higher debt obligation, as the most critical credit criteria is that the city’s general fund revenues are higher than the city’s expenditures, and forecasts over the next 10 years indicate that “revenues are clearly over expenditures, and that includes the new debt.”
McBroome said credit rating agencies like to see that the debt service — cash that is required to cover the repayment of interest and principal on a debt for a particular period — compared to the general fund revenues, is less than 7%, a standard that Encinitas meets. She said when you add debt service with pension debt they like to see that it’s less than 10%, and with the added Streetscape loan, Encinitas will be slightly higher than that, at nearly 12%.
“However, our financial advisor has assured us that we’ll still maintain our high credit rating because we have two strong mitigating factors, and that is that we have strong general fund reserves and that our property tax revenue is very stable, it makes up 60% of our general fund revenues,” McBroome said.
Council members Tony Kranz and Jody Hubbard both pointed out that the project has the potential to eventually generate money for the city, just as the downtown streetscape plan did years ago.
“There’s going to be revenue directly related to the infrastructure that we’re going to do, in the fact that you’re making it easier for people to come to those businesses and to spend money,” Hubbard said.
Before the vote, the council heard from six speakers, most in support of the council moving forward with pursuing the financing.
One opponent, Leah Bissonette, said she felt the project should be financed through a municipal bond, which is voted on by the residents.
“That keeps cities from running off and making excessive commitments of our taxpayer funds without the support of your citizens … This resolution should be voted on by the citizens, it should not be approved at this time,” Bissonette said.
Chris Ryan said she supported full funding of the project, so it doesn’t go down the same path as the 17-year-old roundabout project on Leucadia Boulevard, where two roundabouts were funded and the third took another decade to fund.
“That’s the age of my son who’s going to be going to college in the fall, 17 years,” Ryan said. “I don’t want to see that happen with Streetscape.”
Rebecca Ross agreed, saying she too was in support of full funding and “not adopt a piecemeal approach that we’ve seen burden so many other projects in Leucadia. Streetscape is an important step forward for Leucadia and for the community as a whole and it needs to be completed in a comprehensive way.”