South Lake Tahoe council rejects convention center bonds
SOUTH LAKE TAHOE – A proposal for the city to issue bonds to raise money for the developer of the stalled convention center project went down in a ball of flames on Thursday, as the City Council voted unanimously to reject it.
“There is absolutely no way I can support this,” said Mayor Jerry Birdwell, who called the bonds “junk bonds” and said the probability of them being repaid would be “slim to none.”
And when the bonds were not repaid, it would “leave a black eye on the city of South Lake Tahoe,” Birdwell added.
The decision means the developer of the state line project, Lake Tahoe Development Co., will almost certainly be forced into bankruptcy.
And the council’s vote puts the plan for the convention center, hotel-condominiums and retail known as The Chateau at Heavenly Village in indefinite limbo.
Construction on the project stopped early last year after developers lost their financing. Already two or more notices of default have been filed by parties who are owed money by the developer.
Councilman Hal Cole made the motion to abandon consideration of issuing Mello-Roos bonds for the purpose of restructuring debt on the project.
The motion passed 5-0.
Asked after the meeting if he had any comment, Randy Lane of Lake Tahoe Development Co. said: “none.”
Lane had asked the city to sell Mello-Roos bonds to raise about $25 million to help him pay off debt from property acquisition and the first phase of construction.
About $14 million of the funds from the $25 million bond sale would have been used for “debt restructuring.” About $6.4 million would have been used to make payments to the bond holders for the first two years. Another $3.6 million would have gone to pay past-due and future property taxes, and about $1.2 million would have been spent to issue and sell the bonds.
The bond proceeds would have bought the developer two years to find additional funding for the $420 million project.
The developer – and not the city or the redevelopment agency – would have been responsible for paying back the $25 million raised by the bonds. If the bonds were not repaid, the property would go into foreclosure, and – if anyone bought it – bond holders would be paid from the proceeds of the sale.
During their evaluation of the proposal, city officials said a big benefit to the plan was that the 29 parcels now in the project site would be consolidated into five. The city would acquire two of the lots, valued at $18.3 million. Even if the developer ended up in bankruptcy, the simpler parcel map would streamline future development of the site, officials said.
But for council members, the risks of the bond issue ultimately outweighed the potential benefits, even though completing the convention center has long been a priority for the council.
Cole said he was concerned that the developer hadn’t presented a financial plan for finishing the project.
Birdwell called the vote “one of the most important decisions I will probably make while a council member.” He said after the meeting that he had lost sleep over the decision.
Thursday’s special meeting lasted only about 30 minutes. Two members of the public addressed the council with questions and comments.
The council met in closed session earlier in the afternoon to discuss the proposal, heard presentations on the plan at its Tuesday meeting and received hundreds of pages of documents to review.
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