Encinitas will pursue borrowing $30 million to pay for its long-planned overhaul of Coast Highway 101 in Leucadia, the City Council decided.
City Finance Director/Treasurer Teresa McBroome told the council Wednesday, Dec. 18, that Encinitas should be able to get a 30-year loan with a 3 percent interest rate for the Leucadia roadway improvement project. The long-sought project involves overhauling a 2.5-mile section of Coast Highway 101 from La Costa Avenue to A Street, adding six traffic circle roundabouts, bike lanes, sidewalks and many beautification measures.
“It was mentioned that this is a great interest rate,” Councilwoman Kellie Shay Hinze said before the council’s vote. “I think we need to take advantage of this now.”
The council unanimously voted to direct city finance employees to submit a loan application to the California Infrastructure and Economic Development Bank, with the understanding that if Encinitas later gets some grant money for the roadway project, some of the loan money could be shifted to other future city projects. Commonly known as IBank, the lending agency was founded by the state Legislature in 1994 to finance both public infrastructure and private development projects, its web site states.
The Coast Highway roadway improvement project, which is known as the Leucadia Streetscape project, currently is estimated to cost $28 million, and work is scheduled to begin late next year.
Councilman Tony Kranz and Councilwoman Jody Hubbard said Wednesday, Dec. 18, the project has the potential to eventually generate money for the city, just like the reworking of downtown’s part of Coast Highway 101 did years ago.
“There’s going to be revenue directly related to the infrastructure we do,” Hubbard said, adding that this isn’t the case with city park projects.
The city’s finance director/treasurer told the council that Encinitas currently is making debt payments of $3.5 million a year on previous major construction projects, primarily the Encinitas Community Park project. The proposed Streetscape loan would add $1.6 million to those yearly payments for the next 10 years, she said.
McBroome added that city finance department forecasts show “revenues are clearly over expenditures” for the next 10 years, so she believes that Encinitas should have no trouble meeting the increased debt obligation.
Credit agencies like to see a regular debt load that is lower than 7 percent, and a total debt load, including future pension expenses, that is less than 10 percent, she said. Encinitas can meet the 7-percent standard, but falls short of the 10-percent one, McBroome added, saying that when future pension expenses are factored in, Encinitas is slightly below a 12-percent rate once the Streetscape loan is included.
“However, our financial adviser has assured us that we’ll still maintain our high credit rating because we have two strong mitigating factors,” McBroome said.
Those two factors are strong General Fund reserves and an extremely stable source of yearly revenue, she added. Sixty percent of the coastal city’s annual revenue comes from property taxes.
Before the vote, the council heard public comments from both opponents and proponents of the Streetscape project. Opponents said the project will likely cost far more than what’s estimated, while proponents said the city needed to do this project all at once, rather than breaking it into smaller segments and taking decades to get all the work done.
— Barbara Henry is a freelance writer for The San Diego Union-Tribune