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Pismo to pay off bonds

By April Charlton/Senior Staff Writer

Pismo Beach will soon be paying off the bonds its owes for formation of the city’s redevelopment agency more than 20 years ago, and city leaders hope the move will keep Lucia Mar from suing.

Pismo’s redevelopment agency board — the City Council — voted July 1 to pay off the more than $1.5 million in outstanding bonds this year versus next year, a move that will also save the city $850,000 in interest payments.

By paying off the bonds in mid-September, the city also could possibly avoid being sued by the school district, which has threatened litigation against Pismo Beach for beginning the process of dissolving its redevelopment agency.

“The board believes it will be in a better position and have more flexibility to negotiate with Lucia Mar,” said Pismo City Manager Kevin Rice, about the decision, adding the money used to pay off the bonds will come from income generated from the redevelopment agency.

After the board voted last November to begin deactivating the agency because it would be operating at a $140,000-plus deficit at the start of the 2009-10 fiscal year, Lucia Mar threatened to sue the city for breach of contract.

When the city formed the redevelopment agency in the late 1980s, the school district agreed to not take its share of tax pass-through payments from Pismo for the first 20 years of the agency’s existence.

The first payment — more than $400,000 — is owed to Lucia Mar by the start of the 2009-10 fiscal year, and Lucia Mar believes Pismo can’t legally dissolve the redevelopment agency when there’s outstanding debt.

In April, the school district filed a claim against Pismo that the city never responded to within the allowed 45-day time frame, prompting the start of legal action by Lucia Mar.

However, early last month, Pismo officials sent a letter to Lucia Mar proposing to renegotiate the tax-sharing agreement it has with the district, and the district agreed to hold off on proceeding with a lawsuit to give both agencies time to negotiate.

The redevelopment agency is now estimated to start the 2009-10 fiscal year with a much smaller deficit of about $8,000, compared to the more than $140,000-plus projected deficit if the bonds were paid off next year and save $850,000 in interest payments.

“It gives us much more latitude in negotiating,” Rice said about not having such a large deficit.

In a June 19 letter from Redevelopment Agency Chair Mary Ann Reiss sent to Lucia Mar, the city offered to pay no more than 65 percent of the first tax-sharing payment owed to the school district if the bonds weren’t paid this year.

The next offer to the school district will likely be different now because of the board’s decision to pay off the bonds early.

“If our board makes the determination to pay off the bonds this year, we would expect the proposal to be much different, allocating nearly the entire amount of pass-through to the district,” Reiss wrote in the letter.

Rice said he believes the appointed negotiators for both Pismo and Lucia Mar will be talking by early next week and setting up a meeting to begin the renegotiations.

Lucia Mar school board president Erik Howell was chosen to represent the district and Pismo City Attorney David Fleishman will represent the city in the negotiations.

acharlton@theadobepress.com