HUNTINGTON BEACH : Unused Bonds’ Fate to Be Decided Later

City Council members, who remain sharply divided on what to do with $10.2 million in unused bonds, have delayed action on the issue until later this month.

The council agreed to reconsider the item on Jan. 21 at the suggestion of City Administrator Michael T. Uberuaga, who said the city can retain the unused bonds for at least three more months without draining city coffers.

The city acquired the bonds in 1986 and 1989, but they have not been issued because the council last year scrapped a pier-area parking structure project for which the $10.2 million had been earmarked.

The issue has become contentious because the fate of the unused bonds figures prominently in the city’s effort to solve its financial woes. The city faces a $500,000 deficit this year and is projecting a $5.6-million shortfall next year.

A citizens task force established to advise the council on overhauling the budget has recommended that the bonds be refunded to save $900,000 a year in debt service payments.

City staff members, however, have proposed that the council use the bonds to help pay for the Huntington Central Library expansion, the buildings planned on the new Municipal Pier and three beach-area parking projects. Those projects would all produce new city revenue, which city officials project would offset the annual debt service on the bonds.

Because the city plans to complete those projects anyway, it would cost the city less to issue the unused bonds than to acquire new bonds in the future, Uberuaga said.

According to a study by a financial consultant, canceling the unused bonds and replacing them with a new bond issue in August, 1993, would cost the city up to $6 million more in finance charges. This is because the city has already paid upfront financing for the unused bonds, according to the report prepared by Stone & Youngberg, a San Francisco-based financial firm.

“If you are going to have capital projects in the next year to two years, you ought to consider using these bonds as one of the funds for those projects,” Uberuaga told council members on Monday. “But if you do not want to start new capital projects, then you certainly should (cancel) the bonds.”

Grace Winchell is among the council members arguing that the bonds should be used. She noted that the library expansion, which the council will consider for final approval in two weeks, is widely backed by city residents.

“The library (expansion) is strongly supported by the community and us, so I don’t think it would be reasonable to (refund) this money,” Winchell said.

Other officials, however, are reluctant to use the bonds because of the city’s budget woes. “Now is not the time,” Councilman Jack Kelly said. Mayor Jim Silva said that although he supports the library project, he “can’t see tacking another penny onto the drain on our budget at this time.”