Adios, Reserves
Financial Plan for Shady Rest purchase depletes Town reserve funds
Mammoth’s Town Council gave direction for Town staff to pursue a financial plan for the purchase of the Shady Rest Parcel on Wednesday, December 6. Town Attorney Andy Morris said the Town had provided an initial draft of the purchase plan to the owners of the Parcel, All California Funding, three weeks ago, but is still waiting on a reply. “We have notified them we’d like to bring the purchase agreement back on December 20,” said Town Manager Dan Holler. “If not [by then], in January.”
Holler said that the purchase price of the Parcel, which consists of two parcels (one 24.54-acre parcel and another 0.19-acre parcel), is $6.5 million. Additional money, the staff report read, will be required for completion of the Phase I environmental review ($14,500), title work and appraisals as needed ($25,000), and “due diligence costs,” which include topographic and potential appraisal work (approximately $4,500, said Holler). The total funding needed, including auxiliary expenses, is estimated to be at $6,544,500, according to the staff report.
Holler broke down the proposed funding structure for Council on Wednesday (below). He said that, “$195,000 would need to be put as a deposit in the purchase agreement to put us into escrow…the issue tonight is a financing plan to identify just over $6.5 million that the Town would be willing to commit to this project [which] shows we have the capability to make the purchase.”
The purchase plan depletes some of the Town’s reserves, utilizing all of the dedicated housing-related reserves, as well as a majority of the General Fund and Gas Tax reserves. The plan also relies on the use of current year revenues, which, while currently exceeding budget expectations, assumes that revenues will continue to meet or exceed the approved budget.
The Town’s Undesignated Fund balance “would be fully committed to the purchase” of the Shady Rest Parcel, according to the staff report. “This will leave no General Fund reserves readily available to meet unforeseen needs or to support other projects or programs.”
Almost all ($450,000) of the current amount of General Fund Operating Reserves ($452,071) would be used for the purchase. The Gas Tax Fund would also be depleted, with a transfer of $700,000 from the fund which currently sits at $709,273. Staff recommended paying back $800,000 to the General Fund reserves as well as repaying the full amount taken from the Gas Tax Fund. Staff also recommended increasing the Operating Reserves to $1,800,000 as the investment is paid back over time.
