How Weho Plans to Fund $41M Plummer Park Renovations

Curious about how the city is going to fund the ? Weho Patch spoke with Anil Gandhy, West Hollywood's director of finance and technology services, to get some answers.

First off, Gandhy said, the $41 million amount is just an estimate. The city has not put the project out for bid yet. And when it does, the bid amount will likely come in lower since there is little construction work being done these days, he said.

Of that $41 million, $30 million will come from bonds the city issued. Another $5 million is already in the bank from property tax increment funds, and the remaining $5 million to $6 million, if needed, will come from the future tax increments.

The $30 million bonds were issued in March of this year. While that was almost a year earlier than the money was needed for the planned February start date of the park renovations, it was necessary to issue the bonds so the city would not lose redevelopment money to the state.

Sacramento is attempting to grab redevelopment money that cities had in place in an effort to close the state’s multibillion-dollar budget deficit. The California Supreme Court is now hearing that case to determine whether the money grab is constitutional. Under Proposition 22, which passed in November 2010, the state is barred from raiding local governments, including redevelopment agencies.

Large institutional investors

A bond underwriter put the West Hollywood bonds out to large institutional investors, including pension, insurance and college endowment funds, who snatched them up quickly, thanks to the city’s continued AAA credit rating.   

If an individual had wanted to buy those bonds, he would not have had a chance, since the large institutions had first dibs.

“When a bond is put on the market, big investors are already there looking to buy them,” explained Gandhy, who has been with the city for 10 years. “The bond underwriter let them know the bonds were available and institutional investors purchased them quickly.”

The city’s plan is to pay off the bonds over 30 years. “It’s just like a 30-year mortgage,” Gandhy told Patch. “We plan to pay it off in that time frame.”

But what if the city wanted to pay it back quicker than that?

Gandhy explained that 10 years is the earliest the city can pay off the principal as investors want to make money. The city will make interest payments during those first 10 years, but cannot pay off the principal until after 2021.

The city received about an 8 percent interest rate for the bonds, Gandhy said, which are expected to be paid down through property tax increments. “By law, we can issue bonds and finance them through tax increments,” he said.

Bonds must be used on Eastside

There is no expiration date for the bonds, Gandhy explained. The city has the money and is not obligated to start using it by any specific date.

With all the controversy surrounding the Plummer Park renovations and , what would happen if the city ultimately decided to do nothing to the park?

As Mayor John Duran said during the Nov. 21 City Council meeting, the bonds have been issued and the city already has the money, Gandhy confirmed. However, the bonds do not have to be used specifically on Plummer Park.

The terms of the bonds were for redevelopment east of Fairfax Avenue and west of La Brea Avenue. That means proceeds from the bonds could not be used to rehabilitate the house known as in the pocket park at 1343 Laurel Ave., nor could the money be used for , or even .

“When you issue the bonds, you need to tell the investors what the money would be used for,” Gandhy said. “The money cannot be used outside of the project area. It has to be used within the redevelopment agency area.”

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