Friday, March 03, 2006 | Torrey Pines Golf Course, seated on the pristine La Jolla shore, is a prized destination for golfers worldwide and a treasure for local hackers, but the championship-caliber course has also been thrown into the city of San Diego’s ongoing financial dramatics.
City officials say it’s possible that one of the courses at Torrey Pines, which will host the 2008 U.S. Open, is inappropriately generating money that pays off an unrelated bond and has been put up as collateral for that loan in 2003.
An investigation is in the works, and the municipal government’s shaky financial condition has some worried that a default on its loans will part the city from its famous seaside golf facility.
“This is just another example of the deviation that has been used to fund the city’s Ponzi scheme,” said City Attorney Mike Aguirre, a frequent critic of the city’s past financial dealings. The city government has been in the crosshairs of outside auditors and federal investigators who are probing the city’s fiscal practices.
Aguirre said Thursday that he would review the matter, and Mayor Jerry Sanders said a five-year plan to increase greens fees and make capital improvements to the courses will be delayed until he was satisfied that the city had a handle on its concerns.
The controversy over Torrey Pines stems from the possible commingling of money from the city’s golf enterprise fund and other uses. Similar to the way it handles assets in the Water Department, the city created an enterprise fund that walled off operations of the Torrey Pines, Balboa Park and Mission Bay golf courses from the general budget, which pays for city services such as police, park maintenance and libraries.
The separation of the assets of the golf enterprise fund from the revenue and expenses generated at the courses is supposed to ensure that the city’s golf operations are self-sustaining, Aguirre said. The city attorney said the state law requires that the enterprise fund owns the real estate.
Every year, the golf enterprise fund pays the general fund to reconcile the properties’ fair market value and the amount they were worth when handed over to the enterprise fund decades ago, according to Rod Greek of the City Auditor’s Office. About $1,500 per acre of golf property and 10 percent of the revenue raised at the three courses is transferred to the general fund every year, Greek said.
In the 2005 fiscal year, the golf enterprise fund’s payment to the city’s general fund was roughly $1.7 million
The transfer of money from the city’s enterprise funds to the general fund raised red-flags for city leaders sensitive to accusations in the past that the practice has been misused to shore up a faltering city budget.
City officials said they wanted to investigate the payment program to the general fund further. They said money generated at the course should not be sent back to the city’s day-to-day budget when the golf courses have needs of their own.
“That’s money coming out of ratepayers pocket and, if our initial read is correct, that’s wrong,” said Fred Sainz, the mayor’s spokesman.
The plan will be discussed at a public meeting of the council’s Natural Resources and Culture Committee on March next Wednesday, March 8, and before the full City council March 27. No votes will be taken on the plan, which requests that greens fees are increased and that a $36 million of capital improvements are made at the three city-owned courses.
Officials said that $36 million is capital improvements that golf operations staff proposes in its five-year business plan could be a better use of the money now being paid to the general fund. Raising greens fees to pay for the construction of a new clubhouse at Torrey Pines and other improvements doesn’t make sense, officials said, as long as the enterprise fund is pouring almost $2 million a year into the general fund.
If anything, the money now being paid annually into the general fund should fund the improvements, including a proposed $13 million Torrey Pines clubhouse, not increased greens fees for residents, officials said.
Three golf courses – the two at Torrey Pines and Balboa Park’s – are being used as collateral for bonds dating back to 1996, the Auditor’s Office reported. A public report from 2003 details the use of Torrey Pines north course as collateral for a $22 million bond that refinanced capital improvements at Balboa Park and Mission Bay Park. Information regarding the use of the other courses was not immediately available.
Councilwoman Donna Frye said it’s a common practice to use city real estate as collateral for loans, but said it was a shame that they city’s dire financial straits might jeopardize the taxpayer’s ownership of dedicated parkland such as Torrey Pines.
“We should make sure we never put them in a situation where the public could potentially lose them,” Frye said. “The bottom line is that it’s never good policy, and I’m concerned about it.”
Aguirre said he has also seen a relationship between the golf enterprise’s payment to the general fund and the city’s annual payment of hotel tax money on the 2003 bond that encumbers Torrey Pines North as collateral, but wants a full investigation. The hotel tax money is a regular source of general fund money, and Aguirre said it could be a sign that the city was inappropriately propping up its operating budget with the gold course money.
Until officials’ concerns are answered, the five-year plan will be shelved.
“We need to give citizens the assurance that no shady financial transactions here at City Hall,” Sainz said.
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