City pushes for Measure S refinancing
SOUTH LAKE TAHOE, Calif. – The South Lake Tahoe Recreation Facilities Joint Powers Authority will consider refinancing bonds sold under Measure S following a request by the city of South Lake Tahoe.
City Manager Tony O’Rourke has asked the JPA to change the bonds from tax-exempt to taxable to allow for long-term management of the South Lake Tahoe Ice Arena by Tahoe Sports and Entertainment.
The city council approved a 10-year contract with the company in July, but was forced to modify the agreement in August after it was determined the contract did not meet Internal Revenue Service restrictions on the private management of facilities paid for by tax-exempt bonds. Tahoe Sports and Entertainment is now operating the ice arena under an interim contract, O’Rourke said Tuesday.
Voters’ passage of Measure S in 2000 allowed the JPA to issue tax-exempt bonds for the construction of athletic fields, maintenance of bike trails, upgrades to Paradise Park and construction of an ice arena.
Keeping the bonds tax-exempt would prevent Tahoe Sports and Entertainment from operating the ice arena on a long-term basis and scuttle planned capital investment by the company, O’Rourke said. An estimated $150,000 in annual savings to the city because of the private operation of the ice arena would also be lost if the bonds remain tax-exempt, O’Rourke said.
Making Measure S bonds taxable would allow the city to move forward with the original contract with Tahoe Sports and Entertainment, but would also come at a cost.
The JPA is required by law to show a tax savings when refinancing bonds and should require the city to pay any increase in debt service if the bonds become taxable, according to a recommendation from JPA staff member John Upton.
The difference has been estimated at $400,000, but it is too early to know the exact amount, O’Rourke said. Market changes or refinancing through a bank could lower that amount. A more detailed analysis of the costs of refinancing are expected next month, O’Rourke said.
On Tuesday, former city councilman Bill Crawford criticized the refinancing proposal and questioned what the city will save through private operation of the ice arena. Refinancing the bonds as taxable is like asking the JPA to “sign a blank check” because nobody knows how much authority’s debt service will increase, Crawford said.
“Where is the city going to get the money,” Crawford said, “It’s not in the budget.”
Like Lakeview Commons, the ice arena contract is an example of poor decision-making by the city, Crawford said.
“This deal will break the city’s back for sure,” Crawford added.
The city may look to Tahoe Sports and Education to pay for costs associated with making Measure S bonds taxable, but such discussions are premature because the refinancing remains in the “exploratory phase,” O’Rourke said.
The city would need to resume operation of the ice arena or approve a series of short-term contracts with a private operator if Measure S bonds remain tax-exempt, according to the city manager.
Both the South Lake Tahoe City Council and the El Dorado County Board of Supervisors are expected to hear a presentation on the proposed refinancing Tuesday. Each of the JPA’s members – the city, El Dorado County and Tahoe Paradise Resort Improvement District – will need to approve the refinancing before it can move forward.
A complete refinancing proposal is expected to be before each board next month. The JPA is scheduled to meet again Jan. 20.
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