Council prefers direct loan to Fair

If the Porterville City Council’s 3-1 decision Monday night to draft up terms of a direct loan to the Porterville Fair is ultimately adopted, the 62-year-old tradition will go on.

The Fair Board recently approached the City to co-sign on a $2 million loan through the Bank of Sierra so it could finish construction on its new $4 million fairgrounds before January. In a special meeting, the Council decided it would take less of a risk by taking Bank of Sierra out of the picture and setting up a direct account using its portfolio of investment funds for the Fair Bard to tap into. It plans to collect interest on the borrowed money to enhance its portfolio and take ownership of the grounds if the Board defaults on its payments.

Councilman Greg Shelton dissented.

If the Council and Board were to go through the Bank, they would have to wait as long as December to receive a deed on the land which is currently under the purview of the FAA to be used as collateral. Fair Board representatives said they need the money within the next month to keep construction — which has progressed rather swiftly since ground broke June 16 — going, and completed by the January target date.

Fair Board President John Corkins said the loan will be repaid using proceeds from its capital campaign, which has garnered $630,000 in pledges, and $200,000 in inkind construction donations.

“We want to keep this as community oriented as possible,” he said. “We have to finish what we started.”

Corkins subsequently told the Council that the Fair Board hadn’t considered a second option if the City weren’t willing to back its operation with taxpayer dollars. If the Council approves the terms of the loan — a vote is likely to come down in the beginning of September — it will bring the City’s total contribution to about $4.5 million.

In a License and Development Agreement forged behind closed doors in December 2009, the Council agreed to give the $1.9 million in proceeds from the sale of the original fairgrounds on Olive Avenue to the state, and also guaranteed the installation of infrastructure, such as water and sewer lines, in the new fairgrounds. The contract also states:

“It is anticipated that the Fair and the City will prepare an application for tax-exempt bonds through California Communities, or a similar organization, in an amount supportable by a capital fundraising campaign for the construction of facilities. Said amount of bonding shall not exceed $2 million.”

According to City Manager John Lollis, the clause referencing bond financing was included in the contract to acknowledge the City’s recognition that the project would cost $4 million.

However, neither group said it was aware at the time they wrote the contract, that California Communities, which provides non-profits access to low cost, tax exempt bonds, would charge a penalty for pre-payments — a problem because the Fair Board wants to repay its debt within five years.  

“I don’t feel this is a cost overrun or anything like that — it’s a change in the financing mechanism,” Councilman Pete McCracken said.

After some grilling from Shelton, Corkins revealed that the Board first became aware of a problem with bond financing in February. Although Shelton took jabs at the Fair Board, saying it planned poorly and should have designed only a $2 million site, Vice Mayor Cameron Hamilton said it was now up to the Council to make sure construction would continue.

“I’m not here to lay blame. I’m here to see that we can partner for the good of the City, for the citizens of Porteville ... it was always a $4 million project,” he said.

Shelton was not on the Council when the License and Development Agreement was drafted.
Other possible terms laid out Monday evening, which councilmen Shelton and Brian Ward for various reasons expressed hesitation about, include:

- The Fair Board will have 10 years to pay back the debt.

- There will be no prepayment penalties.
- The Fair Board can withdraw up to $2 million from the account, following approval from an Oversight Committee.

- A City staff member will be placed on the Fair Board until the loan is repaid.
The Council is tentatively scheduled to vote on the terms at its first regularly scheduled meeting in September.

“I don’t want to compete with the private sector ... and the Bank of Sierra is a community business. I don’t want to undercut them,” Ward said. “Even if it would be beneficial [to loan directly without the bank], I have a principle that I’m highly reluctant to bend on. It’s essentially what we did for Kohl’s and I have a problem with that.”

But Ward’s fears were apparently assuaged when Bank of Sierra Vice President Janice Castle told the Fair Board that the Bank of Sierra “wants whatever is best for the community.”

The new fairgrounds will include an $860,000 livestock barn, $905,000 multi-purpose building and $408,000 rabbit barn.

Mayor Ron Irish excused himself from the discussion and vote due to a conflict of interest. He said his company, Stop Alarm, had submitted a bid and been approved to install security systems at the new fair site.

Contact Jenna Chandler at 784-5000, Ext. 1050, or jchandler@portervillerecorder.com.