By Joe Tash
Opinions are flying in the wake of last week's news that the city of Del Mar and the state have reached a preliminary agreement for the city to buy the county fairgrounds for $120 million.
Supporters of the plan say it will give the city much more say over how the fairgrounds is developed and operated, improving the quality of life for city residents. Critics question whether the city has the expertise to run such a large operation, and if the city would use its newfound clout to stifle development of the 406-acre property, which comprises 20 percent of Del Mar's 1.8-square-mile footprint.
"I think it will transform this town. It's one of the most extraordinary things that's ever happened in Del Mar. It will take what's been an adversarial relationship and turn it into a win-win," said Bud Emerson, a columnist for the Del Mar Times who has worked as a business consultant.
But others take a completely opposite view.
"Once people do their due diligence, they will learn that the purchase of the fairgrounds by the city of Del Mar will not be in best interest of the people of San Diego County, the fairgrounds, the fair, the horse racing, the 300 other events at the fairgrounds and especially not in the interest of the people of Del Mar," said Tim Fennell, general manager and CEO of the fairgrounds.
Much has to happen before the deal could be finalized, including passage of state legislation authorizing the sale, which could come before the state Senate for consideration next month. City officials also plan an in-depth analysis of the fairgrounds' books to make sure the deal would pencil out financially. Some Del Mar residents have even called for a public vote, although Del Mar Mayor Richard Earnest said a public vote is not legally required and he would not favor putting the matter before city voters.
The tentative deal between Del Mar officials and representatives of Gov. Arnold Schwarzenegger calls for a nine-member board to oversee the fairgrounds and Del Mar racetrack. Under this scenario, Del Mar would appoint five members to the board, which would also include representatives from the cities of San Diego and Solana Beach, the county, and the San Dieguito River Park joint powers authority.
Currently, the fairgrounds is operated by the 22nd District Agricultural Association, a state agency whose board of directors is appointed by Schwarzenegger.
The purchase would be financed primarily through bonds issued by the city of Del Mar, pre-payment of racetrack lease payments by thoroughbred racing interests, and some state financing, according to Earnest.
While some are questioning whether the city had enough information about the fairgrounds' finances to make its $120 million offer, Earnest said city officials have spent months poring over financial documents, and have created models that show the fairgrounds would generate enough income to cover the annual debt service.
"There's enough revenue to more than satisfy the debt service for the bond," said Earnest in an interview Monday. "We wouldn't do it if it didn't."
That means funding for the purchase would not have to come from Del Mar's general fund budget, which is just over $9 million in the current fiscal year.
Earnest and others said the purchase would give Del Mar and the local region much more say about how the fairgrounds is run, rather than leaving its governance to a state-appointed panel.
"Over time, historically, there has been a rather negative push-pull with the fairgrounds over their mission, which is fundamentally different from our mission. They want more activity, more events, more people, we don't necessarily want that, we like our quiet village," Earnest said. "This gives us the opportunity to control our own destiny and put the fairgrounds into local control."
Earnest said the agreement calls for current operations such as the San Diego County Fair and horse racing to continue, which are essential to producing the revenue to pay for the debt service. If the deal goes through, he said, the property would be managed regionally, in the interests of local residents, and he doesn't foresee conflict between regional interests and those of the city of Del Mar.
"Life's too short to start another turf war here," he said.
However, Fennell said developments such as a decline in horse racing on the West Coast could make it difficult for an outside agency such as the city to cover its debt payments. Currently, the fairgrounds generates $92 million a year in gross revenue for all of its events and activities combined, Fennell said. It has debt service of $4.8 million a year on $50 million in outstanding bonds.
If the debt service was increased to finance the sale, Fennell said, "it will be very challenging to honor that debt service. Who will be on the hook if that debt service can't be fulfilled?"
Fennell said the legislation authorizing the sale would also likely kill plans to modernize and upgrade the fairgrounds. A plan put forward by the fairgrounds last year called for replacing aging exhibit halls, building a hotel with convention space and a health club, among other improvements.
Earnest said if the city does buy the fairgrounds, the so-called master plan would "get reworked."
Longtime Del Mar resident John Haraden supports the proposed master plan developments, arguing they would help Del Mar revitalize its downtown. But "If the city owns the (fairgrounds), they'll be under a lot of constraints from the environmental community to preserve the wetlands and keep the footprint small and try to reduce the traffic going through the city."
In spite of assurances that the city has conducted a thorough review of the fairgrounds' finances, some are skeptical the plan would pencil out, and want to see more financial details.
"I don't want the city of Del Mar to go bankrupt and fall in the hands of the city of San Diego, and we'd wind up as La Jolla North," said business owner and Del Mar resident Preston Vorlicek, who sits on Del Mar's city finance committee.
Vorlicek said he would prefer that if the city does buy the fairgrounds, that it close the county fair and the racetrack and redevelop the property into low-density residential and open space. That would improve the quality of life for Del Mar residents, he said.
However, Vorlicek said, he has been told that scenario could not happen under the present deal with the state, which calls for current operations such as the fair and horse racing to continue.
Vorlicek also said the city should let voters weigh in on the question of whether to go through with the purchase.
Earnest, however, said an election would slow down the sale, which could otherwise be concluded as early as next spring.
"I'm not sure anybody would want to spend time looking at it to vote on it one way or the other," Earnest said. "They elected people to make decisions, let us make decisions. That's what representative government is supposed to be."
In the coming weeks, Earnest said, the city will hold a series of public meetings to gather comments from people both within and outside of Del Mar. The information gathered will be used by the council in making its final decision, he said.
So far, Earnest said, the feedback he's received from Del Mar residents has been "overwhelmingly in favor of doing this."