On Monday, the city of Del Mar is expected to finalize a $3.5 million loan with Union Bank of California to fund a promissory note on the Del Mar Union School District's surplus Ninth Street, or Shores property.
Meanwhile the fundraising group Friend of Del Mar Parks continues its communitywide effort to repay the loan, targeting major gifts and giving other prospective donors a new monthly payment option.
"Friends" president Joe Sullivan says he is grateful to the city for giving his group extra fundraising time via the three-year loan.
"We were always working under a tight deadline," he said. "Now we have a longer time to move forward and broaden community participation."
In June 2007, the city entered into a payment agreement with the school district to purchase the 5.3-acre Shores property for $8.5 million to avoid an outside sale and to preserve open space and secure a home for the property's private Winston School. With insufficient funds to pay for the property, the city's assumption was that the money would come from community fundraising. At the time, $5 million in private contributions had been secured.
But this May, under the threat of a missed payment deadline from fundraisers, the council authorized a promissory note with the school district to give those raising funds additional time.
Soon afterwards, to guard against default, the city began to explore financing options including bonding or a commercial paper program. They took no action through the summer though and soon found themselves in a quickly deteriorating municipal bond market.
The Del Mar City Council approved seeking the bank loan last month after being told by Sullivan his group would not be able to supply sufficient funds to cover a $623,000 November payment, one of seven monthly installments due on the promissory note.
'Just a refi'
Del Mar City Manager Karen Brust says the situation was not as dire as some may think, given the immediacy of the loan, which was secured in a less than optimal credit world. She called it simply refinancing an existing loan.
Brust also says the city was never in a position to default on the promissory note.
"I would have found the money," she said. "The bottom line is the city knew that it had to make a payment and we would have made that payment happen."
Brust says the most likely scenario would have seen the city immediately expending the total amount of money in its Open Space Acquisition Fund, which currently contains about $443,000.
When council members approved the bank loan they also approved drawing $180,000 from the fund to ensure two payments.
The remaining money in the open space fund could be expended over the three-year life of the loan if needed.
It was reported last week that the city had loan proposals turned down by both Bank of America and First Republic Bank.
Brust said that was not technically accurate as the city had only approached the two banks but was told they were not interested in loaning to the city at this time.