Going for the Green

This blue-collar city, still siphoning $2 million a year from basic services to pay for its first golf course-hotel complex, now wants to spend at least $8 million more to build a second 18 holes along the Santa Clara River.

Planning experts call the first River Ridge project one of the worst decisions in recent county history--a blunder that has cost Oxnard at least $25 million and could drain $25 million more from police, parks and libraries during the next 16 years.

After more than a decade of payments, Oxnard’s original $23-million debt for the complex still stands at $16 million. The golf course debt alone is nearly $11.9 million, the same amount borrowed for its construction in 1984.

But officials say they have learned from mistakes the city made in the 1980s, when it built the River Ridge Golf Club on a garbage dump, helped erect a money-losing hotel and subsidized a summer training camp that the former Los Angeles Raiders abandoned years ago.

They admit heads were turned by the opportunity to enter the glitzy world of big-time sports.

“Those sports teams have an aura about them that make people lose their senses in a way,” recalled Mayor Manuel Lopez, a councilman when Oxnard lured the Raiders to town in 1985 with a new hotel and a $1-a-year practice field lease. The City Council thought the Raiders’ six-week camp would lure tourists and shove this onetime farm town into the big-city limelight.

Now, city officials argue, Oxnard needs another golf course community to polish its image and give executives a place to live. Plus the old course is “maxed out,” they say, at 85,000 rounds a year.

This time, officials pledge, Oxnard won’t spend a dime of its $62-million general fund for basic services to pay construction debts. In fact, the city is building the golf course instead of a private developer, because officials think it will make a nice profit. Old landfill problems that inflated golf course costs the first time are history, they say, and there is no hotel-training camp deal to drag this project down.

And if the final numbers don’t pencil out, the city won’t build its new course.

“We won’t repeat our mistakes,” Councilman Tom Holden said.

Tentatively dubbed River Ridge West, the project consists of 416 homes priced from $400,000 to $600,000, two churches and an elementary school on the edge of the new golf course. The acreage, mostly prime farmland north of Oxnard High School, was annexed to the city in January.

The council needs only to approve a final contract with developers, sign a pending agreement with the county rubbish district and approve a plan by golf course architects before construction bonds are sold and the work begins. If things go well, ground could be broken by next spring, officials say, and the course completed by mid-2003.

But, like the ghost of River Ridge past, problems have begun anew.

In October, City Manager Edmund Sotelo fired Finance Director Phillip Molina, the city’s point man on the new River Ridge deal.

Then last month, Molina claimed in a federal lawsuit that he lost his job because Holden and Councilman Dean Maulhardt wanted him to “cook the books” to delete mention of the huge debt on the first River Ridge project to make the new River Ridge West deal look good.

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Holden and Maulhardt say all they ever wanted from Molina was an accurate accounting of revenue from golf course operations, without the weight of debts from the old course and the hotel-and-training-camp fiasco. On its own, the existing golf course makes an operating profit of $300,000 to $400,000 a year, officials say. But that does not count construction debt payments of about $1.2 million a year, which makes the course a $900,000-a-year loser.

The lawsuit is one of two claims now pending against the new project. An Oxnard poverty law firm has also filed a federal court challenge, arguing that the development fails to provide low-income housing required in the city’s housing plan.

Despite these problems, council members are standing behind the new project.

“It should at least pay the cost of its operations, including bond [debts],” Maulhardt said of the new River Ridge course. “If it breaks even, how would it hurt the city? There is a quality-of-life benefit with a golf course, the same as with a performing arts center. These things are part of what living in a city is about.”

Holden has asked Sotelo for a full report on how much the city spends on its old River Ridge debts and on the new project’s finances.

“It hasn’t penciled out yet. But there’s a strong possibility that it will.”

But Molina said he has concerns about whether the new golf course will drain money from a cash-strapped city that strains to meet its municipal obligations. The council has cut support for basic city services every year since at least 1996.

The former finance director, who is seeking $700,000 from the city for allegedly firing him without good cause, said he took his concerns about the second golf course to Sotelo before he was abruptly cut loose last fall.

“There are only very limited circumstances under which this golf course would make sense to the city,” Molina said.

A New Image for the City’s Gateway

Developers say the upscale community bordering Victoria Avenue would “establish a new image for this gateway to the city.”

The property is already scenic: a rich 246-acre quadrant of green row crops and sparkling citrus orchards separated by towering eucalyptus trees to break stiff coastal winds. Its summit is a green hill bursting with spring flowers--an 84-acre landfill sealed with clay and covered with grass and trees. Three mountain ranges are its visual backdrop.

Owners have been angling to develop the flatlands south of the riverside landfill for at least a decade. In 1990, the Oxnard council rejected a petition to build on the acreage because of its value as farmland. But officials left open the possibility of future development. And by 1994, the landowners, the Swift Family Trust, Coastal Ranch Properties and the Mormon Church were moving forward.

A central question early on was who would build the golf course--developers or the city?

A developer study found in 1997 that the course would cost no more than $8 million. And the 36 golf holes, including the existing course, would yield more than $2 million a year in net operating income--far more than needed to pay off debts on the new construction. An advantage was that the new course would begin at the old River Ridge clubhouse and use its driving range, restaurant and parking lot rather than require new ones.

“We thought it would be good for us to build the golf course,” said attorney Allen Camp, a member of the Swift family. “But the city wanted it.”

So developers agreed to give the city 73 acres of farmland. That, along with 26 acres of cropland and the 84-acre landfill, both leased cheaply from the Ventura Regional Sanitation District, would make up the new course. The remaining 45% of the site would be the new neighborhood.

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Then last year, bargaining began in earnest between the city and developers.

By summer, developers had agreed to a $10,700 special assessment for each of the 416 houses to help pay for golf course construction.

“From my perspective it’s a hell of a good deal for the city,” Camp said. “We’re giving them the land, and we’re paying about 10 grand per unit. Most municipalities, when they build a golf course, don’t get the land for free or $4 million from the developer.”

But then Sotelo fired Molina. City staffers worked over Camp’s proposed contract and sent back a new agreement a few weeks ago.

Neither side will say what is on the table at this point.

But council members say they are optimistic a deal can be reached. All five say they like the broad outlines of the proposal.

“It’s attractive, and it’s right there at the entrance to the city,” Councilman John Zaragosa said. “It would benefit the whole region. We need the recreational aspects of it too. We have a city of almost 200,000 people and only one golf course.”

Lopez, who lives in the first River Ridge subdivision, said he thinks the city--one of the county’s poorest--needs to house its rich workers as well as its poor ones. “We don’t want just housing for employees and have the managers live out of town.”

Will a New Course Pay Its Own Way?

Holden said he is wary of the golf course if it costs city taxpayers even $1.

“There is not a direct correlation of benefit to every citizen of Oxnard,” he said. “So if I’m someone who lives in south Oxnard, I don’t think I’d support a project that requires a financial commitment by taxpayers. There are indirect benefits such as tourism, but those were some of the failed expectations of the last project.”

So the question remains, will the new golf course pay its own way?

Figuring that out requires the council to understand what went wrong last time.

So far, however, council members don’t appear to know what the first golf course complex is costing the city or how much they spend each year from their general fund to pay off those old debts.

Their estimates ranged from $300,000 a year to about $1 million.

The actual figure is more than $2 million annually--$929,019 for the golf course itself, $933,750 for the hotel parking lot and $143,692 for the Raiders’ training field.

Not that the council could have found all of those figures in the city’s basic spending plan, its 337-page 1999-2000 budget.

Council members--and the public--would need to check the city’s annual budget audit--completed eight months after the end of the fiscal year--to find the $929,000 transfer out of the general fund to the Golf Course Enterprise Fund in 1999.

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Holden and Maulhardt said they have had problems precisely defining the size of the old River Ridge debt and what that money was spent for.

“Dean and I started asking for those numbers 12 months ago. And I’m extremely frustrated that a second project could be discredited based on the failures of the first project,” Holden said. “I’ve been asking straight-forward questions about the debt and its impact on the general fund. But my questions got twisted to where I was trying to cook the books.”

Molina, in his lawsuit, contends that Holden, Maulhardt and Sotelo tried to coerce him into changing his accounting numbers on the golf course, tried to keep him from talking with reporters about golf course finances--including what he saw as an unduly favorable contract with the current course operator--and then fired him.

He would not elaborate in a brief interview. But a March 1999 internal memo from Molina to developers shows that city analysts included the $1.22-million annual debt payment on the first golf course when calculating whether the new 36-hole, combined River Ridge course would make money. Those numbers, now dismissed by Sotelo as very preliminary, suggested that River Ridge West developers needed to pay a special assessment higher than $10,700 per house for the course to make an immediate profit after bond payments.

While refusing to address allegations in the lawsuit, Holden and Maulhardt said they think the profitability of the new golf course should be considered separately from the debts of the old River Ridge projects.

And whether the new course will make money should be easy to calculate once the council receives reliable estimates on construction costs, how much money the developer will provide and how much the course will net on its operations, Holden said.

If the new 18 holes cost $8 million to build--an estimate supported by three analyses--then the money from developer fees and golf course revenue must cover the annual payment on that debt if it is to break even.

The $8-million debt would increase by at least $2 million once a reserve fund, cost of issuance and the usual advance to cover bond payments during construction are included. To pay that $10 million off at today’s 5.5% interest rate, the city would need revenue equal to $688,000 a year for 30 years, according to county Auditor Tom Mahon.

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The city can’t expect all of that to come from golf course operations, at least in the early years, said Otto Kanny, general manager of River Ridge Golf Club, who would run the new course too.

“It would net $100,000 right out of the chute,” and a minimum of $350,000 in three years, Kanny said. “The land is free. And there’s the synergy of working 36 holes. You have the driving range, you have the clubhouse, you have the pro shop and food and beverage and maintenance, and you don’t have to double those costs to cover another 18 holes.”

Even with a $350,000 operating profit, about half of the annual payment would have to come from developer fees either paid up front or over the years as houses are sold.

The timing of those payments is important. A payment of $10,700 per house, or $4.4 million, up front could nearly halve the bond debt and the city’s annual payment. And there are indications that the city is now asking for more than $10,700 per parcel.

“They submitted a draft agreement [last fall], and we ripped it,” City Atty. Gary Gillig said. “I haven’t seen anything near finalization. But it all pencils out as long as the developer is willing to pony up a big chunk of the construction budget. It depends on the burden the houses are willing to bear.”

But if there is any lesson from the history of River Ridge, it is to be wary of predictions.

When the council was considering the 250-room suites hotel and the Raiders field in 1985, two separate consultants said that project would be successful, Gillig said. “But the city got wiped out and the [developer] got wiped out,” he said. “It was a big disaster.”

In 1994, the developer defaulted on a $14-million construction loan and $4.8 million in unpaid interest. The hotel--now operated as a Marriott Residence Inn--is still open and is, in fact, one of Oxnard’s most popular. But its initial debt was too great to ever pay for itself, Gillig said.

That meant the city of Oxnard, not the developer, had to pay off a $10.6-million bond floated to buy the hotel acreage and build the parking lot. The city’s $934,000-a-year payment continues until 2006. Its $144,000 annual payment for the adjacent 4.5-acre Raiders field continues until 2016.

The first River Ridge course was built with a City Council promise that no taxpayer money would be used to pay for it. But profits didn’t flow as expected.

Its debt was to be paid from operating profits starting at $200,000 annually and escalating to $1 million by the year 2000. But city audits show the course consistently lost money until 1996. Officials say it will make $300,000-$400,000 this year.

The city also expected to make up to $500,000 a year by selling methane gas from the landfill beneath the golf course but could sell it for only $50,000. That has dropped to $30,000 today.

To cut its high interest rate by three percentage points, Oxnard refinanced the golf course in 1986. But it had to borrow $14.9 million to pay the old $11.9-million debt, $500,000 in refinancing fees and a $2.5-million penalty for cashing in the first set of bonds seven years early. The city said the additional $3-million cost was justified because lower interest rates reduced the annual payments from $1.3 million to $1.26 million.

The golf course was refinanced again in 1993, when the city borrowed $15.8 million to lower its interest rate and annual payment to the current $1.22 million. Refinancing cost about $500,000, officials said.

Today, the golf course debt is still $11.9 million.

“We’ve been looking at how this golf course came to be,” Sotelo said. “I see it as a very positive project based on the [original] assumptions made. But the revenues did not materialize. But it absolutely is a success. It’s at capacity. It’s a premier golf course.”

Will the second course pencil out for the city?

Sotelo thinks it will.

“But I cannot go into any detail at this point,” he said. “I’m still working on a lot of this.”