Yorba Linda City Council to consider canceling loans made to Black Gold Golf Club next month

Yorba Linda's City Council is expected to consider canceling all loans due to the city's general fund and special reserve fund from the Black Gold Golf Club and waiving the accrued interest payable on the loans, probably at a February meeting.

The forgiven debt would total $20.2 million – $18.8 million in loans and $1.4 million in interest.

A plan outlining loan cancellation and interest waiver will be reviewed at a city Finance Committee meeting this month, according to Finance Director Scott Catlett. Committee members are Mayor Beth Haney and Councilwoman Peggy Huang.

The committee viewed an eight-page report on the issue from Catlett at a Nov. 19 session. The committee asked Catlett to return with a draft plan for feedback and to incorporate the feedback into a revised report to the full council.

To save on interest payments, the council in 2013 used $1.2 million on hand and $14 million from “excess general fund operating reserves” to pay off Black Gold's outstanding debt, with interest on the city's loan ranging from about $100,000 to $450,000 this past year.

However, Catlett noted the “total debt outstanding today of $23.2 million remains virtually unchanged versus the 2003 balance of $23.7 million when construction was completed.”

Because “the likelihood of the internal loans ever being repaid is minimal” and other factors, Catlett has recommended the council consider “cancellation of all interfund loans due to the general fund and special reserve fund” and “forgiveness of the related accrued interest.”

Catlett's draft report also is expected to recommend a new, $2.4 million loan from the city's Master Plan of Drainage fund to the golf course fund to eliminate the latter fund's “negative cash balance” and provide $200,000 in “working capital.”

The new loan would be repaid over a seven-year period, with interest due annually and with early payments permitted. Already available to the golf course is about $100,000 in working capital in a separate account.

The total $300,000 “is anticipated to be sufficient to accommodate any minor variances in year-to-year net income of the golf course in the immediate future,” Catlett reported at the November committee meeting.

Catlett noted: “With the infusion of cash from this loan, the golf course fund will truly be in sound financial shape for the first time in its history, with sufficient cash flow anticipated to be available to repay the loan in seven years or less with interest.

“It is currently anticipated that the golf course's positive cash flow should range from $375,000 to $450,000 in a typical year based on recent trends,” Catlett stated, with a minimum payment due on the loan each year of approximately $375,000.

Another recommendation is to present within one year for council consideration a long-term financial plan that would include developing reserve and dividend policies for dispersing the golf course's future revenues.