Del Mar council members say fairgrounds purchase effort still alive
By Joe Tash
ContributorRumors of the death of the city of Del Mar’s bid to buy the state-owned Del Mar fairgrounds are greatly exaggerated, City Council members said Monday.
In comments at a July 25 City Council meeting, council members downplayed the significance of published reports that a group of horse owners led by businessman Mike Pegram — which had verbally agreed to put up $30 million toward the purchase — has dropped out of the deal.
“The conclusion that the purchase of the fairgrounds is dead because that horseman’s group has pulled out seems to me premature,” said Mayor Don Mosier, in providing an update to the full council on the status of the purchase effort.
“There’s a lot happening, it’s not dead,” said Councilman Mark Filanc, who, along with Mosier, heads up the city’s efforts to buy the fairgrounds. “It’s working. It’s a glacial process.”
Last year, before former Gov. Arnold Schwarzenegger left office, Del Mar reached an agreement with the state to buy the 400-plus-acre fairgrounds — which includes a horseracing track and grandstands — for $120 million. The property comprises 20 percent of Del Mar’s 1.8-square-mile footprint.
Of that amount, the city planned to borrow $45 million by selling bonds, raise another $45 million through a loan from the state, and the final $30 million was to have come from the group of horsemen.
In an interview published July 9 in the Thoroughbred Times, Pegram reportedly said he has given up on the deal. “Like a lot of things in horse racing, it just didn’t work out,” Pegram is quoted as saying. Pegram did not return messages for comment left by this newspaper by presstime.
Mosier said before the meeting he hadn’t spoken with Pegram for several months, but was aware the investors were frustrated at the slow pace of decision-making at the state level regarding a potential sale of the fairgrounds. While Schwarzenegger had supported the sale, Gov. Jerry Brown, who took office in January, has not decided whether to pursue it.
“This did not come as a surprise to us,” said Mosier of Pegram’s reported comments. “He (Pegram) told us he didn’t want to move forward with the deal right now. He wanted to take a break and re-evaluate it based on the numbers,” following the current Del Mar race meet.
The agreement between the city and Pegram’s group, which owns a number of racehorses including 2010 Preakness Stakes winner Lookin at Lucky, was never formalized with a written memorandum of understanding, Mosier said.
“He was very enthusiastic about trying to make the Del Mar meet the premier event in the country,” bring in the Breeders Cup and improve the backstretch, said Mosier of Pegram. “In the end, we did not reach a signed agreement.”
“This was a serious flirtation but not an engagement,” he said.
Momentum on the proposed sale has stalled since Brown took office in January. A bill by state Sen. Christine Kehoe authorizing the sale has been tabled until next year. And Brown has ordered his administration to study whether the state should sell fairgrounds properties across California.
Councilman Terry Sinnott said the need for better governance at the fairgrounds has not changed, and the city has proposed a better way to oversee fairgrounds operations, called a public trust model, that would spell out allowable uses of the property. Under that scenario, a nine-member board composed of representatives from local cities and public agencies would run the facility as a nonprofit enterprise.
“From my perspective, the message has been heard,” said Sinnott. “The state is not happy with current conditions. They want a review of it.
Sinnott said he believes that once the state review is complete, a decision will be made to sell the fairgrounds and put them under local control.
“At that time, investors, possibly new investors, will come forward again and we will see fulfillment of all the hard work and innovation the city has invested…” Sinnott said.
Councilman Carl Hilliard said that when Schwarzenegger had agreed to sell the fairgrounds, Pegram and his group were interested in investing in the purchase.
The deal is now off the table until Brown has a chance to reconsider, he said.
“Once another deal is on the table, Mike Pegram and his group will be happy to sit down, I’m sure, and pick up … where we left it,” Hilliard said. “I wouldn’t say its dead by any matter of means.”
Along with time, the city has also invested money in the proposed fairgrounds purchase. Earlier this year, Mosier said the city had spent about $150,000 of the $200,000 it had budgeted for up-front costs related to the purchase.
While the council expressed optimism Monday that a deal could still be reached, Joe Harper, the president and general manager of the Del Mar Thoroughbred Club, which runs the annual race meet, said he has heard from contacts in Sacramento that a sale is unlikely any time soon.
“At the present time the governor has no interest in selling the fairgrounds,” Harper said he has been told during recent conversations. “You can never say never in politics, but at the present time, there certainly are no plans for selling it.”
Harper has not taken a position against the sale, as was done by officials with the 22nd District Agricultural Association, which runs the fairgrounds for the state. He did, however, question financial aspects of the proposed deal. In particular, he said, he was concerned that if bonds were sold to pay for the purchase, revenue currently used to maintain and improve the facility would instead go to debt service.
“I never could see the deal, where the money would all stay here,” Harper said.
But Filanc said the city’s finance model is sound, and even accounts for declining racetrack revenue.
“The deal works from our standpoint,” Filanc said Monday. “We are still very committed at the city to moving forward.”