Judy Thum (standing, left), Chair of the Encinitas Commission for the Arts, presented a history of projects originally envisioned for Encinitas in 1989. Of those goals, only the dream of a performing arts center remains unrealized today. She and several other speakers encouraged the city council to put the Pacific View property to that use.

A last-minute financing question posed by City Manager Gus Vina dominated discussion of his Pacific View “Activation Plan” at Wednesday evening’s Encinitas City Council meeting.

Inexplicably missing from his two-page advance report, the question was whether the city should pursue taxable or non-taxable bonds to finance the $10 million property. Vina recommended that the council choose taxable bonds, but that method will add $50,000 each year to the originally budgeted $733,000 yearly interest on the purchase. He also noted that rising interest rates have added to the debt service, so if the city chooses taxable bonds, it could total $815,000 yearly for 30 years.

Vina explained that the original budget estimate employed tax-exempt bonds, which are cheaper but severely limit how the property can be used. For instance, if a non-profit organization rents space on the Pacific View property and pays the city rent, it’s considered a private use and violates the terms of the non-taxable bond. When asked for clarification and guidelines on the allowed uses, Finance Director Tim Nash said that it’s very complex, there are no clear distinctions, and that the ultimate judgement lies with the IRS.

Councilmembers bristled at Vina’s request that a decision on the type of bond be made immediately. “It sure would have been nice to know [this] when we were doing the budget in the first place,” councilmember Lisa Shaffer remarked. Mayor Kristin Gaspar agreed, saying that income-producing ideas for Pacific View have been a part of discussions all along and should not have come as a surprise to city staff.

After a lengthy discussion, councilmember Teresa Barth attempted to summarize the situation. “This is really where the rubber meets the road. Are we going to go forward or are we going to back out of the sale? Taxable [bonds] are, in my opinion, the only way we can go because we have always said we need to make revenue on this property.”

The council decided to postpone the bond type decision until more information could be obtained from bond counsel. The bond arrangements are scheduled to be finalized at the council’s October 22 meeting.

The council voted unanimously to approve Shaffer and Deputy Mayor Tony Kranz’s motion to create a subcommittee headed by Teresa Barth and Lisa Shaffer that will follow up on the five-point interim use plan submitted by Kranz and Shaffer. Their plan contains more specifics than Vina’s original version, and suggests participation from staff and interested parties, as well as evaluation criteria for submitted proposals and a “long-term visioning” path for Pacific View. The subcommittee will also begin addressing the issues related to financing and zoning before the October 22 meeting. The council-approved Kranz/Shaffer plan can be viewed here.

Fifteen members of the public addressed the council about the Pacific View purchase. Nine were affiliated with various arts entities and enthusiastically endorsed the purchase. They offered several ideas for the site, the most popular being a performing arts center.

Six speakers questioned the city’s financing plans, including Donna Westbrook, who said she was “floored” by the increased financing costs and the fact that the bond question “wasn’t even on the staff report.” Kathleen Lindemann, a Pacific View supporter, expressed concern about the bonds but also suggested that the purchase price could be repaid in five to seven years using private means.

As the five-hour-plus meeting was about to end, Shaffer moved that an interim evaluation of the city manager and city attorney occur during a closed-door city council session in November so that current councilmembers can weigh in before the council’s makeup is changed after the November election. Barth seconded, so the interim evaluation will happen, in addition to the final evaluation scheduled for January, 2015.