Malibu city officials are exploring the possibility of selling bond-like certificates of participation to accumulate most of the funds for the building of Legacy Park and Trancas Park. Some critics fear the city could be taking on too much debt.
By Jonathan Friedman / Assistant Editor
A City Council subcommittee on Monday supported a city staff recommendation to prepare the process for the issuance of certificates of participation, which are similar to bonds, to generate up to $10 million to complete the funding for the construction of Legacy Park and Trancas Park. The subcommittee’s recommendation is expected to go before the City Council on March 10.
This funding method was used in 2006 when the city issued $17.4 million worth of COPs to generate most of the money used to purchase the Chili Cook-Off site, now known as Legacy Park. The city made its first semiannual payment on this debt in December at a cost of $470,000. It will continue to make payments of approximately $1 million annually for almost 30 years, using the rent money from the tenants of the three existing structures-the Malibu Lumber mall (which is under construction), Coldwell Banker and Malibu Animal Hospital- on Legacy Park to come up with the money.
If the city were to issue COPs to fund the parks’ construction, it would cost an estimated $700,000 over a period of 30 years, although Administrative Services Director Reva Feldman stressed on Tuesday this is a tentative figure. The city would need to issue more than $10 million worth of COPs to generate $10 million because of costs associated with the issuance, Feldman said.
The Legacy Park Project, which includes the creation of the park and storm water treatment system, is expected to cost an estimated $12 million. The city received a $2 million grant from the Annenberg Foundation, and is working on raising another $2 million to match that. It also has $1 million of county Proposition A money. Trancas Park, which will include a dog park and playing or practice fields, is estimated to cost $3.1 million, and the city so far has $665,000 set aside for it.
The city had wanted to complete the funding for both projects with grants. City Manager Jim Thorsen said on Tuesday this is still the hope, but currently there are no grants the city qualifies for, and the state grant process could be delayed because of budget issues.
“The grant funding is contingent upon state budgets and other factors,” Thorsen said. “We have to be prepared to move forward once the plans are ready [the parks receive final approval], and have all of our funding ready to go.”
Thorsen said if the city receives grant money after the issuance of COPs, that money could be used to pay off the debt.
Both projects are in the design phase, with draft environmental impact reports being written. The DEIR could be ready for Legacy Park by the end of the month, Thorsen said. COPs would not be issued until the projects are approved by the City Council at public hearings, which could take place before the end of the year.
City Councilmember Andy Stern, who sits on the subcommittee with Councilmember Sharon Barovsky, said on Tuesday he supports the issuance of COPs based on the information he has seen so far, but he would like to see the final analysis before making a firm commitment.
Barovsky said on Tuesday she is only interested in exploring the idea. She denied having given her support to the concept, although the staff recommendation she and Stern approved on Monday states staff would “prepare documents for the 2008 Certificates of Participation Issuance.”
City Council critics John Mazza and Marshall Thompson attended the meeting. They both said they were concerned about the city accumulating the debt.
When asked about this on Tuesday, Stern said Thompson had no credibility, and “the city’s in great financial shape so far.”
Feldman, the city staff member in charge of the city’s finances, said the issuance of COPs would the be “the most prudent way” to fund the projects, as opposed to using the city’s General Fund money.
“We’re able to borrow the money because of the [rent from the Legacy Park] structures,” she said. “We can use our cash for other projects. We have a lot of projects coming down.”