Debt to Build Sheriff’s Station in Montrose Retired 7 Years Early

In an era of governmental deficit spending and budget crises, financing of the Crescenta Valley sheriff’s station is a bit of an anomaly.

The debt on the Los Angeles County facility, built 20 years ago with government bonds, has just been retired, seven years ahead of schedule.

The early payoff is saving taxpayers almost $1 million in lease payments and still leaves another $150,000 in surplus savings, which will be turned over to the county’s coffers today.

The La Crescenta station was built by the nonprofit Los Angeles County Montrose Sheriff’s Station Corp., a five-member board of local residents and activists appointed in 1971 by former County Supervisor Warren Dorn. The corporation was responsible for building the $1.65-million project, then leasing it to the county to repay the bond debt, which was not scheduled to be retired until 1997.

“We were very careful about doing things,” Kenneth A. Schechter, president of the corporation’s board of directors, said in explaining the early payoff.

The unusual demonstration of fiscal conservatism was accomplished fairly simply. Despite their political appointments, the board members steadfastly refused over the years to turn surplus funds from the construction project over to the county, as is traditionally done.

Instead, the surplus was invested in accounts that earned high interest in inflationary periods during the 1970s and ‘80s, Schechter said. The earnings were reinvested until this spring, when the corporation’s savings matched the principal remaining on unredeemed bonds. The debt has now been paid and ownership of the station will be turned over to the county today.

Almost two dozen public building projects were financed through the formation of similar nonprofit corporations in the late 1960s and early 1970s, said Charles Vose, an attorney whose law firm specializes in setting up such corporations.

He said the corporations served as a popular “financing tool” after government agencies ran up against constitutional limitations on borrowing money. Public entities had to fund costly projects either out of their annual budgets or obtain approval of two-thirds of the voters for a general bond issue--almost an impossible task.

By forming a nonprofit corporation, the county was able to issue tax-free leasehold mortgage bonds that were used to raise funds needed for a project. The debt would be paid back through lease payments made by the county to the corporation over a period of 25 years. In the case of the Crescenta Valley sheriff’s station, the county’s annual lease payments were to be $134,000 from 1973 through 1997.

Several mortgage bond issues have since been retired, but the Montrose group is believed to be the first to pay its debt early, county and corporate officials said.

Sharon Yonashiro, director of the county’s public finance program, said several county-formed corporations have had a surplus remaining at the end of a construction project, largely because contingency money is set aside in the event of unforeseen problems during building. However, she said typically the surplus and any unexpected earnings by a corporation are used by the county to reduce the amount of its annual rent.

The Montrose board, however, refused the county’s request, Schechter said, because members believed that “it would be irresponsible” to use investment funds to pay annual government expenses. “That’s like borrowing money from a bank to buy a car, then using the money to pay for gasoline,” Schechter said. “We didn’t think that was appropriate, although it’s what our federal government does all the time.”

Yonashiro called the board’s conservative stance “a two-edged sword.” She said a reduced rent would have allowed the county to spend more of its taxpayer dollars on other programs. “We are delighted that we are paying the sheriff’s station off earlier, but when the supervisors asked to reduce the rent, that board declined.”

Schechter said the board’s tactics saved taxpayers $921,600 in principal and interest payments. A check for more than $146,000 will be presented to County Supervisor Mike Antonovich during ceremonies today. Up to $10,000 more also will be handed to the county once the corporation dissolves, he said. The program will be held at 9 a.m. at the station, 4554 Briggs Ave.

The station, completed in 1973, replaced cramped quarters that the Sheriff’s Department had in a brick storefront at 3807-3809 Ocean View Blvd., next to the Montrose Shopping Park.

Expansion of the two-story station was completed last year, adding new parking facilities on the 2.67-acre site and about 2,800 square feet of expanded locker rooms, offices, storage and a community meeting room to the existing 16,274-square-foot building, said Sgt. Bill Ryan, operations officer. Funds for that project--which cost almost $1 million--came from the county’s capital projects budget.