The board that oversees the state-owned Del Mar Fairgrounds approved a proposal by its staff to “investigate potential financing options” for a construction loan of up to $13 million, which would be used to convert an underperforming satellite wagering center into a 1,900-seat concert venue.
The action at the Tuesday, March 14, meeting of the 22nd District Agricultural Association board, follows a vote in January, when the board agreed to spend $250,000 on preliminary planning for the project.
So far, the agency has hired an architect to begin design work, but has not yet hired a contractor to handle the renovation, said fairgrounds officials.
While the January vote in favor of the expenditure was unanimous, on Tuesday, Director David Watson cast the lone “no” vote in a 7-1 decision by the board. Watson said he could not support the action because the only written information provided to the board was a two-sentence description of the proposal contained in the meeting agenda.
“This is not the way a public agency is supposed to do business,” Watson said.
However, board members who sit on subcommittees working on the project and its financing, said that before any final decision is made to borrow money for the project, the board would have to approve the transaction.
Board president Russ Penniman said the board’s action on Tuesday will allow the 22nd DAA to bring the proposed project forward to the California Department of General Services, which must also approve the loan, according to the district’s legal counsel.
Director Lee Haydu, a former Del Mar councilwoman, said she understood Watson’s point, and that she would have preferred to be provided with more written documentation about the financing proposal before the meeting. But she voted to support the motion allowing the plan to move forward.
According to Penniman, the architect hired by the agency has estimated that construction will cost $9.5 million, while an earlier study put the price tag at $11 million. He said the final price will likely fall within that range. District officials sought authority to borrow up to $13 million to be able to cover any contingencies.
A business plan prepared for the project in 2016 assumed the district would pay an interest rate of 6 percent to borrow the money, but current information has pegged the rate lower, at between 4.2 and 4.5 percent, officials said.
Penniman said the construction loan could be structured to be paid back over 20 years, with potential annual debt service of about $900,000 if the full $13 million is borrowed.
Among the financing options would be a loan from IBank, or the California Infrastructure and Development Bank, a state-owned financial institution, said Penniman. Last year, the city of Del Mar financed the construction of its new city hall through IBank.
Penniman said the 22nd DAA may be able to finance a portion of the construction costs with cash from its reserves.
Over the past several years, the district has been considering new uses for the 91,000-square-foot satellite wagering center, called the Surfside Race Place, which is located on the fairgrounds property. Attendance has fallen sharply in recent years, and the 22nd DAA wants to generate more revenue from the building.
A study last year by Cal State San Marcos business students determined a concert venue at the site would be financially viable. The 22nd DAA is considering a partnership with the Belly Up Tavern, a Solana Beach music club, to book talent for the new concert venue.
District officials are also working with the California Coastal Commission to determine if any change to the 22nd DAA’s current coastal permit would be needed for the concert venue.
Director Stephen Shewmaker, who heads up the subcommittee overseeing the project, said the Surfside Race Place is permitted for up to 5,000 visitors per day, and the concert venue would seat only 1,900.
“We don’t see any major issues with the Coastal Commission,” Shewmaker said.
Watson also said he is concerned that, although the board approved spending seed money on the project in January, it seems to be moving forward quickly, with officials discussing a tentative opening date in September 2018.