S.D. Will Loan $1 Million to Famosa Slough Owner to Preserve Acquisition Deal

In an unusual move designed to preserve San Diego’s bid to acquire Famosa Slough, the City Council on Tuesday agreed to loan the slough’s owner $1 million to pay off a private bank loan.

The 8-0 vote, which came with no discussion by council members, is part of a deal that extends an escrow agreement between the city and developer Terry Sheldon to at least Sept. 29 while the city attempts to raise the money needed to purchase one of its last remaining wetlands.

Mayor Maureen O’Connor and Councilman Ron Roberts announced last May that the city would purchase the slough from Sheldon for $4.6 million, $2.6 million of which would come from city coffers.

Just $500,000 So Far

Attempts to raise the remaining $2 million from state sources by a Nov. 3 deadline have netted the city just $500,000 so far, although two applications for $500,000 each are pending before the state Coastal Conservancy and the state Wildlife Conservation Board. No formal attempts to secure the final $500,000 are pending.

“It sort of keeps the deal on an even par,” Roberts said of the agreement, adding that, if the deal falls through, the city will recover all its money.

Leaders of Friends of Famosa Slough, who have been fighting to preserve the Ocean Beach marshland for more than a decade, were prepared Monday to question the deal in a presentation to the council. But Roberts postponed discussion until Tuesday and met privately Monday afternoon with the community activists and city officials who negotiated the escrow extension.

Jack Sanders, a board member of Friends of Famosa Slough, said Tuesday that his group had “agreed to defer to Councilman Roberts’ judgment at this time,” and he declined to discuss the matter further.

However, a source close to the negotiations said the organization’s leaders remain troubled by the $4.6-million price to which the council agreed last year, as well as the decision to loan Sheldon the money without consulting Friends of Famosa Slough.

The source, who insisted on anonymity, claimed that local and state regulations would have prohibited Sheldon from building more than 45 homes on the site. If true, the $4.6-million price is far too high, the source said.

Might Raise Stakes

As a precedent, the deal might also raise the cost of acquiring other wetlands, including the San Dieguito River Valley, the source said.

“Now it’s (Roberts’) game to win or lose,” the source said. “He has to come up with the funds to make the deal, or admit that his strategy failed.”

City officials, however, believe that Sheldon might be able to develop more than 220 homes on the site and might wage an expensive legal battle to gain that right, Roberts aide Wayne Raffesberger said.

Under the agreement, the city will loan Sheldon $1 million of the $2.6 million it has set aside for the purchase. Sheldon will repay the loan at 8.75% interest until the deal goes through, at which time all interest payments will be forgiven, Raffesberger said.

The agreement also includes a provision to extend the escrow agreement until Jan. 31, 1990.

Sheldon, who will use $950,000 to pay off a loan to Torrey Pines Bank and $50,000 to pay for title insurance, could not be reached for comment Tuesday. His attorney, Robert Caplan, was also unavailable for comment.

Roberts suggested that, as the holder of a first trust deed, the city might be able to acquire the land for just $1 million if Sheldon defaults on the loan. However, he said he does not know whether that is probable.