The Morning Report
Get the news and information you need to take on the day.
Tuesday, April 05, 2005 | It is always curious when a developer mounts a campaign to “save” a park.
It gets more odd when San Diego City Councilman Michael Zucchet and Mayor Dick Murphy let one of the city’s biggest political contributors dump his Naval Training Center park costs on taxpayers. On Tuesday, Murphy and Zucchet plan to go further by pushing another deal sweetener on NTC developer Corky McMillin’s behalf. This action’s intent is to pressure City Attorney Michael Aguirre to allow a $15 million private bond offering to supposedly fund construction of Naval Training Center’s 46-acre park.
Private offerings do not require the level of disclosure that would accompany a normal city bond offering. This allows the council to hide deal details such as fees, rates, terms and who purchases the loan.
Yet, if it were not for previous Murphy action, funding of the park would be a non-issue.
Doing what the city attorney has pledged to do – investigate NTC deal changes – shows why:
(A) When McMillin bid on NTC, his development proposal declared that he would ask for $13.5 million in Mello Roos bonds to pay for road – not park – improvements. Mello Roos, or Community Financing District bonds, are city-guaranteed financial instruments paid by additional taxes levied in new developments.
(B) On July 19, 2002, a last minute deal switch by the City Council gave McMillin the right to develop NTC over a proposal from Miami, Fla.-based Lennar. Lennar had been recommended by an independent commission. An exclusive negotiating agreement was drafted. Dated July 22, 2002, this agreement states on page 5 of 15:
6. Project costs, not including private development costs on individual development sites, are categorized below. Project costs will be separately analyzed and will be funded by the Developer.
(C) The Disposition and Development Agreement followed. Attachment number 12-B of the DDA was the NTC Park Improvement Agreement. Page 3 of 18 of this agreement states:
2.2.2 Master Developer’s Financial Commitment. Master Developer’s financial commitment for the project, pursuant to obligations set forth in the DDA and this Agreement, is to fund construction of those Park Improvements identified in the Estimated Budget. However, Master Developer shall only be financially responsible for Park Improvements identified in the Estimated Budget up to $14,779,800 plus 10 percent advancement of funds (subject to reimbursement) for any Additional Requirements imposed as a requirement of the park planning and approval process described below in Section 3.4 of this Agreement.
Then . . . the deal switched.
(D) These contracts show McMillin, not taxpayers, was to pay for the park. Then on June 25, 2002, Murphy and the city council voted to pay for the park with city-backed Mello Roos bonds, with Councilwoman Donna Frye dissenting. The total allowable Mello Roos funding was increased from $13.5 million to $30 million to include $14.6 million for park construction. This move changed the park from a McMillin obligation/expense to a revenue item, which entitles him to profit from its construction. As the developer, McMillin gets a 5 percent fee, plus he is allowed 12 percent-of-gross project revenues as a “preferred developer return.”
On Tuesday, Murphy and Zucchet plan to switch the Mello Roos bond offering from a public offering to a private one. Private offerings do not require the level of disclosure that would accompany a normal city bond offering. This allows the council to hide deal details such as fees, rates, terms and who purchases the loan.
The $15 million being demanded will only pay for part of park construction, leaving taxpayers on the hook to pay for the rest.
John McNab is a public land activist.