SOLANA BEACH — With a creative financing mechanism, Solana Beach is buying a .7-acre lot directly north of La Colonia Park at 700 Valley Ave., a move that will increase the size of the current park by nearly 20 percent.
“This is a terrific acquisition for the … Eden Gardens community, as well as the city,” Councilman Peter Zahn said. “I think it’s going to get tremendous use from people throughout the city, and it’s going to continue to build that park to be really a jewel.
“I think it’s going to bring out a lot more people than currently use it because there are going to be great facilities there,” he added. “This is … all-around terrific.”
To make the $2.8 million purchase, the city is borrowing money from the sanitation fund and setting up an “internal service” account, in which money from the general fund will be deposited to repay the loan.
“We’re not using sewer fund monies to pay for this,” Mayor Dave Zito said. “We’re borrowing from the sewer fund and paying it back … over a fairly short period of time.
“It’s actually going to be general fund monies that will be paying for this project,” he added. “It’s just over a period of seven years instead of all in one lump sum.”
Zito described the plan as a win-win. The city can buy the property using a loan with a lower interest rate, and money in the sanitation fund is earning higher interest than it does in its current investment portfolio.
It’s the same model Solana Beach used in 2011 to pay off its $3.1 million unfunded pension liability with the California Public Employees’ Retirement System.
Those annual payments ranged from approximately $427,000 to $527,000. The final payment of $168,269 is due by the end of the next fiscal year in June 2019.
As was the case then, council members agreed to borrow the sanitation fund money for seven years. Payments would be $445,699 annually, with interest totaling $319,892 at 2.78 percent.
The sanitation fund currently has an active cash reserve of $13.5 million. The city just went to bid for a $6.2 million pump station project.
With anticipated incoming revenues, that would leave a fund balance of about $6 million at the end of the next fiscal year, when payments for the lot purchase would begin, City Manager Greg Wade said.
“Typically, we like to have at least $5 million” in reserves, he added.
There was no opposition from the public or council members.
“I think this is a very exciting proposition and I’m happy to support this,” Councilwoman Lesa Heebner said.
“I think this is a terrific acquisition,” Councilwoman Jewel Edson added. “We can’t find park space. It doesn’t grow on trees. It will be a great addition to the community.”
“I also agree it’s an exciting opportunity for the community,” Zito said. “We don’t have many opportunities to acquire parkland.”
He said if the city didn’t buy the parcel, “it would have been developed and lost to us forever.”
Escrow is expected to close in September. Wade said the city will begin a public outreach process after that to garner input on property improvements.
The parcel is adjacent to the north end of La Colonia Park where the skatepark is now being built.