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Challenger balks at Merced County offer

Merced County and Challenger Learning Center officials may be moving closer to resolving a lease issue.

The county's latest offer would give Challenger a two-year lease with no rent obligation. The details of the offer were disclosed in a letter Challenger officials received Thursday.

"We want to give them (Challenger) an opportunity to transition to a long-term plan that's going to work," said Michael Calabrese, chief deputy county counsel. "We want to partner with them to make that happen. We want to give them some time to make that happen, that's why we are giving them two years of no rent."

The county was a lot happier about the proposal than Challenger officials were.

Both entities have been in negotiations since June when Challenger officials warned the center could shut down if its lease costs were to increase. At first, the county had proposed Challenger pay $325,805, and about $13,032 in yearly common area fees. Challenger wouldn't start paying rent until July 1, 2016.

After that, both sides exchanged proposals, but failed to reach an agreement. The deadline to come to a conclusion has been extended twice, and they now have until Sept. 15 to resolve the issue.

The latest offer to Challenger comes with conditions that all other tenants at Castle have, Calabrese said. Challenger officials would have to maintain the property. "The only thing that's really new is that we want to have access to their records to review any transactions they make because we want to make sure that they don't enter into any deals that could harm the county," he said.

Taxpayers expect the county to manage the taxpayers' resources the best it can, Mark Hendrickson, director of commerce, aviation and economic development for the county, added.

What county officials have learned from this process is that neither side is ready to make a long-term commitment at this point, Calabrese said. "So it makes more sense for us to look more shorter term to give them a chance to see what they can do, and hopefully in a couple years the long-term plan will be in place," he said. "But in the meantime, they survived, they keep providing the services to the kids of this county, the county continues to be proud of this asset."

The two years of not paying rent gives Challenger officials the opportunity to create a long-term plan and a viable business model, Hendrickson said. "The nice thing is that we share the same goal, which is to see their success in the long term, and in order for us to get there, obviously some steps need to be taken in the short term to give them time to develop a plan that would work," he explained.

However, Challenger officials didn't see the offer as a positive one and believe that two years isn't enough time.

"We are really disappointed with their reaction with the inability to address what our issues are," said David Olsen, president of the CLC Foundation's board of directors.

Their main concern is a $1.6 million USDA mortgage they are paying back. Olsen said they can't pay a lease and make payments on the loan at the same time. "They've ignored that issue all along and continue to do it," he said.

Also, a two-year lease might present challenges for Challenger with the U.S. Department of Agriculture regarding the loan, Olsen added.

The county stopped making monthly payments of $12,500 to Challenger as of June 1. The payments were established under an agreement approved in 2003. The center used the county payments to make the loan payment.

Challenger officials will talk to their attorney to see what other options they have, Olsen said.

County officials will wait to hear an official response from Challenger officials about the offer, Calabrese said.

Reporter Yesenia Amaro can be reached at (209)385-2482, or