That "Property Thing"

A DMUSD parent recently published a letter to the Del Mar Times regarding the DMUSD's tardiness in procuring a site for the district offices.

In her letter, Ms. Takahashi writes:

May of 2010 is when the District Office's rent on the Shores property increases 30,000-fold. Instead of paying $1 a year, DMUSD will be paying $30,000 a year from its general fund (the same general fund that pays teachers' salaries) to use the dilapidated office on 9th Street in Del Mar.

It was no secret that the lease payments would increase from $1 a year to $30,000 a year starting year 3 post-escrow. Members White, Easton, and McDowell were there.

May of 2010 is the date when the lease payments to the City of Del Mar increase from $1 to $30,000 annually, and it is true that members White, Easton, and McDowell were aware of this.

What the letter neglects to point out is that escrow on the Shores property closed on May 15, 2008 and that the original lease with the City of Del Mar was a 3-year lease, to expire in May 2011, 11 months from now.

The original lease specifies rent payments of $1 per year for the first two years, to increase to $30,000 annually in May 2010. There is still a year remaining on the original lease negotiated with the City of Del Mar.

On March 1st, former DMUSD superintendent Sharon McClain wrote a letter to the City of Del Mar requesting an extension on the lease of the Del Mar Shores property from May 15, 2011 to August 30, 2012.

McClain requested that the $30,000 annual payment be converted to a monthly payment at the end of the term of the original lease in May 2011, with a 60-day notice to vacate.

The preschool/childcare program currently housed at the Winston school would be vacated by the end of the original lease, May 2011. Maintenance and operation sheds would be vacated by June 30, 2011, to coincide with the end of the school year.

McClain also stated that the intent of the district was to move during the 2011/2012 school year.

The need to find a new site for DMUSD district offices should be a high priority to DMUSD trustees, but the $30,000 payment to the City of Del Mar for May 2010 to May 2011 is already part of the agreement negotiated back in the summer of 2007.

More information:

• Letter from Sharon McClain to the City of Del Mar to extend the Shores lease
• Minutes of the March 8, 2010 Del Mar City Council Meeting

Guys, how's it coming on that property thing?

Source: Del Mar Times

By Kate Takahashi
DMUSD parent

It's spring - May to be exact - and schools in Del Mar are buzzing with field trips, school plays and end-of-year parties. PTAs are balancing their budgets, organizing thank-you dinners, deciding their slate for next year. Principals have just completed the unfortunate task of deciding how to slice and dice their shrunken ESC programs, among their hundreds of other duties.

May also has a special significance for the DMUSD Board of Trustees. May of 2010 is when the District Office's rent on the Shores property increases 30,000-fold. Instead of paying $1 a year, DMUSD will be paying $30,000 a year from its general fund (the same general fund that pays teachers' salaries) to use the dilapidated office on 9th Street in Del Mar.

There has been plenty of time to find a new office. The Shores property was first considered surplus back in 1988, then again in 2005. Minutes from the Board meeting dated August of 2007 reveal a heads-up from then-Superintendent Tom Bishop that when the Shores escrow closes, the District will have 36 months to vacate the property.

It was no secret that the lease payments would increase from $1 a year to $30,000 a year starting year 3 post-escrow. Members White, Easton, and McDowell were there.

There has been plenty of effort. Next month, Colliers International agents will have spent one year showing DMUSD properties and land. The board members have seen at least 11 properties. If no deal has been made by June, the poor agents will have donated their time free of charge to the decision-masterminds at DMUSD. Trustee Comischell Rodriguez seems to be the lone board member who recognizes the urgency of this issue, as she urged her other colleagues to make a decision at a recent board meeting.

Real estate decisions may perplex this board majority, but other decisions that might prove gut-wrenchingly hard for most humans have been swiftly executed. Trustees White, Easton and McDowell decisively ended Tom Bishop's career at the DMUSD in 2008, sending him on his way with more than $300,000 of our kids' general fund money.

More recently, Trustees White, Easton and Perkins had no trouble deciding to fire Dr. Sharon McClain. (Steve McDowell abstained on the vote; he evidently could have gone either way on halting her career.)

Dr. McClain had barely unpacked her belongings in her new office when DMUSD Attorney Dan Shinoff started his expensive wild goose chase, searching for that great material breach of contract that we'll never hear of.

So the board CAN be decisive about certain things. It's just all the wrong things. In the meantime, the community wants to know: Guys, how's it coming on that property thing?

Bank loan prevents Shores default

Source: Del Mar Times

7:42 AM
By Jim Kerr

The Del Mar City Council decided on Oct. 20 to secure a bank loan to assure timely payments on a $3.5 million promissory note the Del Mar Union School District's Ninth Street Shores property.

With a Nov. 15 deadline looming for a scheduled payment of over $623,000 and insufficient funds available from either the city or community fundraisers, the city was left with little option but to obtain credit in what has become a very unstable financial world.

If we default there are serious repercussions," Deputy Mayor Crystal Crawford said Monday. "We made a decision collectively to buy the property. "Now we have no choice."

The approved loan will come from Union Bank of California in the amount of $3.5 million. The interest rate will be based on LIBOR (a rate at which banks borrow from other banks in the London inter-bank market) at the time of signing.

The rate, currently in the 3.5 percent range but changing daily, will be fixed for the first year. After one year the city will have the opportunity to repay the loan without penalty.

At the same time the city will also draw down $180,000 from its Open Space Acquisition Fund to ensure two debt service payments.

The fund's total $443,000 possibly could be expended over the three-year life of the loan - depending on further fundraising success. The city will still consider donations as the first source of funding while the loan gathers interest.

In a sign of the times, the city's financial adviser Richard Morales said two major banks, Bank of America and First Republic Bank, turned down the city's loan request outright - this despite the city carrying a relatively low debt load and AA credit rating.

At Morales' urging, the council elected not to pursue additional credit for two other capital projects - the 21st Street sewer lift station and the 17th Street lifeguard and community services headquarters.

"Due to continuing instability and turmoil, I'm recommending very strongly to just prepay the Shores promissory note," said Morales. "This is not the best time to be financing. If it weren't for the Shores I wouldn't be recommending you do this financing at all."

Earlier this month, Joe Sullivan, president of the Friends of Del Mar Parks, the nonprofit organization heading Shores fundraising efforts, told the city they wouldn't have the money to meet the first of seven scheduled principal and interest payments on the promissory note.

This prompted the need for immediate action from the city or it faced default and undoubtedly a downgrading of its credit rating.

Sullivan said he was grateful for that action and promised to continue concentrated fundraising efforts.

"This is a marathon now," he said, "not a sprint. We now have to focus on participation by everyone in the community."

Clock ticking on open space

Group owes $3.5 million on land preserved for city

By Monica Unhold

http://signonsandiego.com/news/northcounty/20080614-9999-1mc14shores.html

June 14, 2008

DEL MAR – After banding together to secure the last piece of open space in Del Mar before it was snapped up by developers, members of the Campaign for Del Mar Shores are left with a large debt and limited time to pay it off.

The site is prime real estate in the heart of Del Mar – 5.3 acres of ocean-view property at Ninth Street and Camino del Mar, the city's main street.

The community group spent three years raising $5 million to buy the land to give to the city. It now has 11 months to raise the remaining $3.5 million in the $8.5 million sale that became final last month.

The city has guaranteed that the group will come up with the balance to pay the seller, the Del Mar Union School District.

“We're very optimistic that we'll be able to raise the remaining funds,” campaign chairman Joe Sullivan said this week.

The group must pay off the balance in monthly installments of $500,000, with 5 percent interest, between November and May 2009 or the school district can sell the property to someone else.

The playing fields at the site, which is called the Del Mar Shores property for an elementary school that closed there in 1970, are a major reason the community rallied to save the land from developers.

Kim Filanc, a 20-year resident of Del Mar, is particularly attached to the property because her son and daughter spent a lot of time there as children.

Her daughter attended a preschool that once operated there and her son played baseball on the field. Although she does not go to the park as often anymore, she donated $25,000 to help it remain open for public use for a long time to come, she said.

“It's just nice to know it's there,” Filanc said.

Some of the buildings on the site are used by the school district for administrative offices, and the rest by the private Winston School.

The Winston School, which has occupied part of the site for 20 years and enrolls children with special learning needs, has promised to raise 35 percent to 50 percent of the property's purchase price. In return, the school has signed a long-term lease to remain on the city-owned property.

On June 1, Campaign for Del Mar Shores held a community barbecue to celebrate the May 19 closing of escrow. The campaign invited the 300 people who attended to suggest how the land should be used.

While the suggestions have not yet been formally compiled, Sullivan said they mostly revolved around recreational uses such as improving the playground, installing picnic benches and adding an outdoor fitness course.

Members of an informal dog group that meets on the grounds in the afternoons suggested adding an enclosed dog park area, Sullivan said. A larger baseball field and community garden were suggested. Although the community had the opportunity to make suggestions, the City Council has no immediate plans to put the use of the park on its agenda, Councilwoman Crystal Crawford said.

For now, the priority is to help fundraising efforts to pay off the $3.5 million owed to the school district, she said.

The group has until Nov. 15 to raise the first $500,000 payment. Nearly 225 people have donated to the campaign, with contributions of up to $1 million coming from some individuals.

To raise the additional money, the group plans to hold neighborhood coffees, campaign coordinator Barbara Mandel Pache said. The group may also apply for private grants.

If every adult in Del Mar donated $1,000 to the park, the $3.5 million would be paid off, Pache said. While that goal may seem absurd in some places, it may not be in Del Mar, where the median household income is about $113,000.

Sullivan said fundraising was remarkably successful when there was no guarantee the purchase would happen.

“People were very generous in donating on the promise and hope of acquiring the property,” he said.

The Del Mar Shores land has long been connected to service to the community. In the late 1800s, it was the original location of the Del Mar train station. From 1947 to 1970, it was the site of Del Mar Shores School. Eventually the student population outgrew the facilities. Students were diverted to new campuses, and the school was closed.

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Monica Unhold is a Union-Tribune intern.

City, Del Mar reach new deal on Shores property

By Ian S. Port
Assistant Editor

Under the agreement, the city paid the district $5 million of the original $8.5 million purchase price — the amount raised since July by fundraisers for the Winston School and a citizen group called the Campaign for Del Mar Shores. (Escrow on the initial payment had not closed by press time, but was expected imminently by both city and district officials.)

The remaining $3.5 million will be paid to the district over the course of one year at an interest rate of 5 percent, with monthly payments of $500,000 commencing Nov. 15. The loan is secured by the 5.3-acre property itself, and there are no penalties for paying it off early.

Under the lease terms agreed upon, the district may remain in its offices on the site for $1 annual rent for two years. Rent for a third year will be $30,000.

A ground lease between the Winston School and the city is still being worked on. Under the terms of the original July agreement, the Winston School owns the buildings it occupies, but the city owns the land under them.

The agreement —which officials said still contains a few unresolved details — comes after weeks of negotiations between the city and the school district, which kicked off after it became clear that fundraisers would not be able to raise the full $8.5 million purchase price by the original Feb. 28 deadline.

Fundraisers had warned since the deal was inked in July that raising $8.5 million in seven months would be difficult. Some said it was the most ambitious privately financed project the city has ever taken on.

By February, when the escrow was slated to close, only $5 million had been deposited into the account.

The district extended the deadline to May 15, inciting fierce criticism from some Carmel Valley parents who said it was giving Del Mar residents a sweet deal and could have obtained a higher price for the property.

Officials from both organizations said they were relieved that the extremely complex negotiations on the property were essentially concluded and that an agreement had been reached.

“I am so excited to have this,” said Del Mar Councilmember Crystal Crawford said of the agreement. “[Negotiating] makes the fundraising part look easy.”

“The transaction was complex and involved and immense amount of hard work,” said DMUSD Board President Annette Easton in a statement. “There are still a number of details — which are minor in comparison to the big picture — that will need to be worked through. We have every confidence that those details will be satisfactorily resolved.”

Shores property: DM school board members should keep in mind that they have options

So what is the big deal about the sale? Why not sell it for fair market value and be done with it? Because there are regulations about how to “dispose” of government owned surplus property and it can get a little tricky. Fair market value is not an option when selling government to government because there needs to be a substantial discount. So here are the steps as I understand it: public agencies selling real property must first offer it to other public agencies (for example, city, county, state entities) at a discounted rate, though the discounted rate facet seems to be debatable when reading various legal opinions on this. If the various tiers of public agencies and non-profit entities are not interested in the property, then the property may be offered at auction to any bidder.

In 2007 the DMUSD made a deal with the city of Del Mar to sell the approx. 4.94 (or 5.3)-acre piece of land at a discounted price of $8,500,000. In March, just a week before they were scheduled to close escrow, the city asked for a 30-day extension. It gets a little “sketchy” here, since personnel issues are secret and our board isn’t talking in open session about the Shores property, but somewhere in the middle of all this re-negotiation talk the board forced the Superintendent’s resignation. Is this the “rest of the story” as Paul Harvey might say? Why would this be an issue worth spending nearly $300,000 of reserve money to buy out a contract unnecessarily? Oh, and by the way, what is the fair market value of the Shores property?

From what I have learned from reliable sources, a private trust is (or at least was) ready to make an offer to purchase the Shores property for a great deal more than $8,500,000 – I have heard numbers between $20,000,000-$25,000,000, just to let it sit. (Sounds logical since I recall that the Solana Beach School district paid $4M+ for each acre of land they purchased to build Solana Pacific School a few years ago.) I was told that this particular Buyer would preserve the integrity of the property as a ball park and school for a number of years. This seems like it could be a win-win for everyone if the city is unable to purchase the land.

I feel that we as parents and community members must take note of the spending and big financial decisions being made by our board of Trustees right now. If we add up the ancillary implications of just one decision to oust the Superintendent, that’s close to $300,000. Add to that $500,000 more this year (or next) to make up for the fundraising crises caused to the Foundation by the board’s decision, along with hiring costs of a new Superintendent, this brings us well over $800,000 in unforeseen expenditures from our district reserves! Is it worth it?

Personally, I am not proposing that the district sell The Shores to one entity over another. As a matter of fact, the sale is pretty much a done deal now. What I am asking is that the board of trustees bears in mind that they have had options. Their decisions affect everyone in the Del Mar Union School District boundary area and they should work with all diligence to make decisions that will best benefit the entire district and move forward.

More recently, there has been a movement to call in to question budgeted expenditures that have been a part of DMUSD's successful Strategic Plan. These expenditures afford our teachers planning time and parallel and vertical collaboration opportunities at their school site and throughout the district. I would hope our families will take the time to really understand the benefits our district has enjoyed by daring to be unique. Please don't forget that we can boast having the finest schools because we dare to think outside of the box and be all we can be by working together!

It is obvious that the board of trustees wants control of our district and now they have it. So from this point on I would expect them to make responsible decisions and point us in a positive direction, not a non-specific, non-clarified direction. They should stop the micromanagement and begin supporting the very capable staff in place, empowering them to do their jobs.

I would hope they want to move forward together with a collaborative plan to heal and stabilize our district from the repercussions of their decision. What’s done is done, and now representatives from the Foundation, PTA, community at large, and district personnel from throughout our district should have a say in our future. The next superintendent should be chosen together and given authority due them under the law to be the district’s “CEO.” The superintendent should feel supported by the board of trustees and be allowed to make personnel decisions and over-see the day to day learning at the school sites- keeping our children’s successful education always first and foremost!

Comischell Bradley-Rodriguez
Concerned DMUSD Parent and Volunteer

City, Del Mar reach new deal on Shores property

By Ian S. Port
Assistant Editor

Under the agreement, the city paid the district $5 million of the original $8.5 million purchase price — the amount raised since July by fundraisers for the Winston School and a citizen group called the Campaign for Del Mar Shores. (Escrow on the initial payment had not closed by press time, but was expected imminently by both city and district officials.)

The remaining $3.5 million will be paid to the district over the course of one year at an interest rate of 5 percent, with monthly payments of $500,000 commencing Nov. 15. The loan is secured by the 5.3-acre property itself, and there are no penalties for paying it off early.

Under the lease terms agreed upon, the district may remain in its offices on the site for $1 annual rent for two years. Rent for a third year will be $30,000.

A ground lease between the Winston School and the city is still being worked on. Under the terms of the original July agreement, the Winston School owns the buildings it occupies, but the city owns the land under them.

The agreement —which officials said still contains a few unresolved details — comes after weeks of negotiations between the city and the school district, which kicked off after it became clear that fundraisers would not be able to raise the full $8.5 million purchase price by the original Feb. 28 deadline.

Fundraisers had warned since the deal was inked in July that raising $8.5 million in seven months would be difficult. Some said it was the most ambitious privately financed project the city has ever taken on.

By February, when the escrow was slated to close, only $5 million had been deposited into the account.

The district extended the deadline to May 15, inciting fierce criticism from some Carmel Valley parents who said it was giving Del Mar residents a sweet deal and could have obtained a higher price for the property.

Officials from both organizations said they were relieved that the extremely complex negotiations on the property were essentially concluded and that an agreement had been reached.

“I am so excited to have this,” said Del Mar Councilmember Crystal Crawford said of the agreement. “[Negotiating] makes the fundraising part look easy.”

“The transaction was complex and involved and immense amount of hard work,” said DMUSD Board President Annette Easton in a statement. “There are still a number of details — which are minor in comparison to the big picture — that will need to be worked through. We have every confidence that those details will be satisfactorily resolved.”

Del Mar Shores Property - Meeting Minutes

Source: http://delmar.ca.us/City/Meetings/CityCouncil/20080414.htm

Del Mar City Council Follow-Up
April 14, 2008
Del Mar Communications Center
240 Tenth Street, Del Mar, California

CALL TO ORDER/ROLL CALL - 6:05 p.m.

PLEDGE OF ALLEGIANCE

Councilmember Hilliard led the Pledge of Allegiance.

COMMUNITY ANNOUNCEMENTS/PRESENTATIONS

ORAL COMMUNICATIONS (Non-Action Item) - None.

OLD BUSINESS

1. Shores Property – 215/225 Ninth Street (Crawford/Hilliard).

   Action Taken: Council solicited public input and approved committing City resources to assist in the purchase of the Shores property to provide the fundraisers with additional time for their campaign. Council directed the Council subcommittee to continue to negotiate with the School District regarding their proposal.

   Deputy Mayor Crawford/Councilmember Hilliard: Continue to negotiate with the School District to close escrow of the Shores property by May 15, 2008.

   City Manager: Secure short term interim financing to provide the fundraisers with additional time for their campaign to purchase the property.

   Reference: Clerk’s File No. 702-1

ADJOURNMENT - 9:00 p.m.

Del Mar Shores Property - Special Meeting

The City of Del Mar will be holding a special meeting to discuss possible revision of the terms of the purchase price of the DMUSD Shores property.

DATE:
TIME:
LOCATION:
 

Monday April 14, 2008
6:00 pm
Del Mar Communications Center
240 Tenth Street, Del Mar, CA

More information:

• Del Mar City Council Special Meeting Documents
• Agenda Item 1 information

City of Del Mar
Memorandum

TO:
FROM:
DATE:
SUBJECT:

Members of the City Council
Deputy Mayor Crawford and Councilmember Carl Hilliard
April 14, 2008
Shores Property 215/225 Ninth Street

ISSUE:

Whether (1) to approve new terms for the purchase of the Del Mar Union School District (DMUSD) property (Shores), and (2) to use City resources, including borrowed funds or the sale of property, to assist in fundraising efforts.

RECQMMENDATION:

The City Council should consider the options presented here and, following public input and discussion, determine a) whether City resources should be used to assist in the fundraising efforts to purchase the Shores property, and b) whether the City should tentatively accept the School District's proposal to amend the terms of the Purchase Agreement.

FISCAL IMPACT:

Unless the purchase money for the Shores property is raised privately by community funds, the City could find its general fund and budget at risk.

ENVIRONMENTAL IMPACT:

CEQA review for the purchase of the Shores property was done previously. Various categorical exemptions apply. No review is required for the City's financing decision.

BACKGROUND:

On July 30, 2007, the City entered into an agreement with the Del Mar Union School District for the purchase of the Shores property. Among other things, the Purchase Agreement called for deposit into escrow the full purchase price of $8.5 million by February 28, 2008.

On August 6, 2007, by Resolution 2007-35, the City Council announced the acquisition of the Shores property and set forth the purpose of the acquisition and its intentions regarding the use of the Shores property. Resolution 2007-35 cited the City's inability to finance the acquisition and the Council's support for the joint fundraising efforts by the community and the Winston School, which fundraising efforts would make the purchase possible.

The first three benchmark payments required by the purchase agreement were made; however, fundraising efforts have fallen approximately $3.5 million short of the goal for the February 28 deadline. By letter dated February 19, the Campaign for Del Mar Shores presented a direct proposal to the School District to extend the deadline for escrow. Specifically, the Fundraisers sought additional 12-months to complete the fundraising effort. That proposal was not acceptable to the School District. The City and the District have since negotiated to extend the deadline and amend the terms of the Purchase Agreement.

Two extensions of the closing date have been granted by the School District, during which time the City and the District have discussed various options for amending the terms and conditions in the Purchase Agreement. The District's final extension of time to reach a tentative agreement on the amendment expires on April 15, 2008.

Recently, the District conveyed a proposal to the City that requires the City to close escrow not later than May 15, 2008. Upon the close of escrow, the City will deliver $5 million together with its promissory note for $3.5 million secured by the property, with monthly interest payments, and with periodic principal payments. The payment schedule would be as follows: $250,000 on August 15; $1.5 million on November 14; $250,000 on February 13, 2009 and the balance of $1.5 million and all accrued but unpaid interest on May 15, 2009. The District's proposal also requires the City to reimburse the District's legal and consultant costs relating to the amendment in an amount not to exceed $10,000 and to complete the execution of the Lease Agreement for the District's lease back of its administrative office space no later than May 9, 2008. The District's representatives have made it clear that no further extensions of the closing date (past May 15, 2008) will be granted.

Representatives from the fundraising committee, The Campaign for Del Mar Shores, and from the Winston School will provide the Council and the community with an update regarding the current status of the campaign and the total funds received and pledged at tonight's special meeting.

DISCUSSION:

As noted above, efforts to raise community funds for the_purchase of the Shores property have resulted in deposits to the escrow account totaling approximately $4.8 million. There remains, however, a shortfall of approximately $3.7 million required to fully fund the purchase price. Furthermore, additional funds must be raised to cover the loans made to the fundraising campaign as well as the costs of fundraising.

Given the May 15, 2008, deadline for closing escrow, the purchase of the Shores property can only be accomplished with assistance from the City. Such assistance might include short term financing secured by the City, which arrangement would give the Fundraisers additional time to raise the balance of the funds required. However, municipalities may not acquire real property by entering into installment sales contracts or mortgage agreements unless the total amount of the purchase price is paid in the year the property is acquired. The use of City-backed "bridge" financing, therefore, obligates the City's resources and could put the City's AA credit rating at risk. This risk must be carefully considered. Tonight's special meeting should include a discussion of the options available to the City in the event the fundraising efforts fall short of the funds necessary to satisfy the promissory note that would become due and payable in 12-months.

Options for consideration and discussion include the following:

• sale of a portion of the Shores property
• use of the City's open space funds - one time money (approximately $400,000)
• use of interim financing (bank loan, commercial paper program, shortterm notes)
• exchanging the Balboa lot for an equivalent portion of the Shores
• property and liquidating the Balboa lot to help retire the City's indebtedness for the Shores purchase relocating City Hall to the School District administrative office site on the Shores property