If it all goes according to plan the City of Lathrop might have just made its last $1.2 million debt service payment for a series of bonds taken out to participate in the South County Water Supply Project.
And even that payment might end up coming back to them.
Since 2008 Lathrop has been on the hook for the debt payments when Richland Planned Communities, which committed to footing the lion’s share of the bill, defaulted on its obligations. A $3 million letter of credit helped make it through the majority of the first three years, but Lathrop ended up having to dip into general fund reserves to make the initial payments shortly thereafter.
The scenario was one of the major reasons that the city opted last year to sell $5 million worth of its water allotment from the SSJID surface water treatment project to the City of Tracy so that it could meet its debt obligations.
But when Saybrook, the developer that is stepping in to take over the development of Central Lathrop, agreed to take over the payments as a sign of good faith, it appeared that Lathrop was out of the woods, financially speaking.
They still very well might be.
As a development agreement is hammered out between the city and Saybrook, the company has opted to forego the next payment until it is in place and has agreed to make up the payment on the back end.
If everything works out, it will be Saybrook, and not the City of Lathrop, that will be responsible for all future debt service for that portion of the loan in order to secure the water necessary for a development of that size.
The failure of Richland’s attempt to develop the property was devastating to not only the city but the subcontractors that had begun work in the area in an anticipation for the houses that were believed to be going in out in that portion of town. It wasn’t until a subcontractor approached the Manteca Unified School Board and informed them that he was halting work on a sewer lift station until he was paid that the district learned that Lathrop High School would be without an active sewer line. That was the case until Saybrook recently completed the work, again as a sign of good faith to the city.