City Mounts PR Campaign in Response to Some Candidates’ Criticism of Finances

• Officials Bristle at Assessment of Lumber Yard Deferral

BY BILL KOENEKER

Apparently feeling bruised by city council campaign rhetoric that has been continually bashing or at least calling into question the city’s financial status and business dealings as a commercial landlord in the Civic Center area, municipal officials are issuing press releases that they say set the record straight.
One of the most talked about and controversial business dealings is an amendment to the Malibu Lumber Yard lease agreement that calls for an interest-free deferral of $1.5 million.
City Manager Jim Thorsen this week put a side-by-side slide comparison of the original agreement and amended deferral agreement on the city’s web site for clarification. Special email versions were sent to the council candidates.
“I believe the information is understandable and as simple as we can make it. We will be posting this to the website today,” wrote Thorsen in the email.
At the same time, the city issued a press release this week stating that municipal officials saved the taxpayers an estimated $1 million in interest payments over 30 years because it hit the market “at such an opportune time and enjoyed such favorable pricing with its latest sales of $6.6 million in Certificates of Participation for the new city hall improvements.”
The announcement was attributed to Mayor Sharon Barovsky, who along with Councilmembers Andy Stern and Pamela Conley Ulich, have been complaining publicly about what is being said by the candidates. Barovsky and Stern are the two members, both are termed out of office, who have been most critical of the candidates’ statements. There are no incumbents running for office.
Stern called some of the accusations completely false, while Barovsky expressed annoyance that the business dealings of the current council were being called into question.
The city manager’s slide show states, “The deferral only becomes effective when the city receives sufficient base rent revenue from the Lumber Yard, animal hospital and former Coldwell Banker sites to meet its annual debt service of $1.3 million,” the explanation states.
The deferral agreement calls for payment of base rent of $925,000 per year to the city with a base rent increase every five years.
What changes, according to city officials, is how the so-called participation rent is paid in the future.
“For subtenant rent revenue in excess of $3.2 million, city will receive 15 percent and lessee will receive 85 percent. Lessee is allowed to receive a deferral amount up to $1.5 million. Lessee is required to pay the city back the full deferred amount based upon a scheduled formula. Payback of deferred amount is conservatively anticipated to begin within eight years. Lessee is required to accept wastewater flow from animal hospital, (Could save the city up to $1 million),” the web chart states.
Some candidates criticized various aspects of the deferral, one saying it should not have been done, another saying it should have had interest attached and others questioned what they considered special treatment of the lessees, Richard Wientraub and Richard Sperber.
Other council hopefuls expressed concerns about the amount of COPS that have been issued on behalf of the city with an estimated total payback cost of $65 million.
Others have zeroed in on the recent amount of COPS to be utilized for the new city hall improvements. Conley Ulich was the lone voice on the council calling into question continuing this method for funding projects.
However, the press release is full of praise for the issuance of more COPs to renovate the 30,000-square-foot building.
“The City of Malibu’s strong credit rating and the investors’ purchase of these COPs reaffirm the city’s diligence in managing its finances and protecting taxpayer funds,” said Barovsky in a prepared statement. “The city council and the staff work together to ensure prudent management of the city’s resources and this shows we are on the right path.”
Before the sale, Stone &Youngberg, the city’s underwriter for the securities, had estimated the city’s annual payments to investors in the COPs would be $480,000 a year. After the sale, the estimated annual payment was reduced to $444,000 per year.
The press release goes on to state, in a previous sale, the city sold nearly $20 million in COPs to purchase the building for the new city hall. These securities sold within an hour and at interest rates low enough to save taxpayers an estimated $3 million over the life of the financing.
The city purchased the new city hall building last year for $15 million and hopes to move into the building next year, when renovations are complete. The ultimate goal of city officials is to give up paying what would be nearly $1 million per year in rent for a financial device that would allow the municipality ownership of the building.