Fair to look at finance options for Surfside remodel

Fair to look at finance options for Surfside remodel
The Del Mar Fairgrounds board of directors authorizes staff to investigate potential finance options for up to $13 million to pay for a project that would repurpose Surfside Race Place into an entertainment venue. Photo by Bianca Kaplanek

DEL MAR — Plans to turn Surfside Race Place into a concert venue hit another high note March 14 when the 22nd District Agricultural Association board of directors voted 7-1, with Kathlyn Mead absent, to authorize Del Mar Fairgrounds staff to investigate potential finance options for up to $13 million to pay for the improvements.

The move allows the 22nd DAA, which governs the state-owned fairgrounds where the facility is located, to seek required approval from the California Department of General Services (DGS) to borrow money to finance the project.

As a matter of policy, it will also keep the Food and Agriculture and Finance departments “in the loop on the process so there are no bumps along the way,” deputy attorney general Josh Caplan said.

According to an estimate from the architect, the remodel will cost about $10 million. Russ Penniman, board president, said he increased the amount to cover any unforeseen expenses.

“I’m not saying that ultimately we will go with this ($13 million) number but it was a number that was tested by staff as probably … a safe number that would get us over the finish line once we started the project,” Penniman said.

A 20-year, $13 million loan at 4.2 percent interest would cost the fairgrounds about $900,000 annually.

Surfside is an approximately 100,000-square-foot satellite wagering facility built in 1991 to accommodate 5,000 people. At one point it attracted about 2,700, but a decrease in offsite betting has resulted in an average daily attendance of about 350.

A recent study conducted by students from California State University San Marcos concluded that turning Surfside into an entertainment venue would be “highly profitable,” with a return on investment in less than five years, if at least 90 concerts are held annually.

Board members, who have been looking to repurpose the facility for several years, support plans to make the underused building profitable. But David Watson, a land-use attorney, voted against the March 14 motion to investigate financing options.

“Obviously a whole lot of work has been done and a lot of investigation has been done and a lot of conversations have been had,” Watson said. “There’s a lot of information and yet in our board packet we have two sentences for a $13 million possible loan.

“This is not the way a public agency is supposed to do business,” he added. “I am not going to go along just to get along anymore. That is not responsible public official behavior.”

“There’ll be a comprehensive package including the business case, including the timeframe and the estimate on the job itself,” Director Stephen Shewmaker said. “It’s just not ready yet.”

Shewmaker said Penniman needs approval of a number to present to DGS “to say the board is onboard with that amount.”

“This board member is not onboard with that because I haven’t seen that package,” Watson said. “I haven’t seen it. I haven’t read it. I haven’t analyzed it. I haven’t reviewed it.”

“I understand what Director Watson is saying,” Director Lee Haydu said. “It would be nice to be able to read some of these things beforehand and have more understanding so you can think about it.”

“It’s all investigative,” Director Lisa Barkett said. “We’re just saying we need that permission to go to General Services now. It’s important to do that first step because if we don’t follow that step and get the permission we need we’re going down a road that we really don’t know we can take.

“The intent is not to hide the information here,” she added.” We’ll all get the information. We knew it was going to happen. We’re all in favor of it happening, of moving forward with this facility because in the event of horse racing getting to a point where it continues to drop we need to generate other income.”

Once a finance option has been identified it must be approved by the board.

“When it does come back to us I’d like to see more (information) upfront so I can read it and think about it before I get here,” Haydu said.

Final design plans are also subject to board approval. If all goes as planned the project is estimated to be complete by Sept. 1, 2018.

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