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HomeMy WebLinkAboutRS2-Economic Development Agency c c o OVELOPMENT DEPARTMOT OF THE CITY OF SAN BERNARDIN REOUEST FOR COMMISSION/COUNCIL ACTION FROM: KENNETH J. HENDERSON Executive Director SUBJECT: FINANCING OF NEW POLICE FACILITY DATE: May 7, 1993 Svnoosb of Previous Commission/Council/Committee ActionCs): None. Recommended MotionCs): (Community DeveloDment Committee) MOTION: That the Community Development Commission adopt alternative # 5 as set forth in the attached Staff Report relative to the financing of the new police facility. Further, that the Commission review its priorities adopted on March 7, 1992 and take all necessary and appropriate actions resulting in the reappropriation of lax allocation bond proceeds in an amount sufficient to finance the construction and furnishing of the new police facility. Administrator NDERSON Contact Person(s): Kenneth J. Henderson Phone: 5081 Project Area(s): Central ~H2r!!I. cccm Ward(s): One (I) Supporting Data Attached: ~ReDOrt FUNDING REQUIREMENTS: Amount: $10 663.142 Source: Bond Proceeds Budget Authority: Reouested -----------------------------------------------------------------------------------------------------------..------------------- Commission/Council Notes: -----------------------------------------------------------------------.-------------------------------------------------- Klli:lag:plcrm.agd COMMISSION MEETING AGENDA MEETING DATE: 05/10/1993 Agenda Item Number: ;t c c c >w D QE LOP MEN T DE PAR TOE N T STAFF REPORT -------------------------------------------------------------------------------------------------------------------------- Finaneint! of ~Poliee Facility Over the last several months, the Community Development Commission and its Redevelopment Committee have conducted ongoing discussions regarding the construction of the new police facility project. These discussions have included Ad Hoc comments on the method of proposed financing. As staff and outside architects and engineers are expediting the entitlement, cost estimating and preparation of construction drawing processes, it is appropriate to review possible financing strategies. During the deliberations conducted by the Mayor and Common Council while setting the date for the vacation of Seventh Street Public Hearing, it was requested that various financing alternatives be considered during the discussion anticipated to occur at the public hearing. It is with the above in mind that staff presents the following alternatives: 1. PRIVATE FINANCING: This would entail the development and issuance of a Request for Proposals (RFP) to competitively select a developer with established banking relationships who could obtain private construction financing subject to the City entering into a long-term lease with the developer for occupancy of the facility by the Police Department. The benefits to this scenario is that neither that City or the Agency would have to debt finance the construction of the building and the building would be on the tax rolls generating property taxes for the City and the Agency. A key negative from the City's perspective would be the uncertainty of the lease rates over time, but this issue could be most effectively handled during the initial lease negotiations. This alternative would probably also upset the current construction schedule. 2. ISSUANCE OF "A" RATED CERTIFICATES OF PARTICIPATION WITH 51 MILLION CASH CONTRIBUTION BY AGENCY (30 YEAR TERM): This scenario would require $11,655,000 with the primary uses being deposits to the Construction Fund ($9.7 million), the Debt Service Reserve Fund ($721,577) and furniture, fixtures and equipment ($1 million). This last figure is just a guesstimate. The benefits to this scenario are that the City and Agency share in the costs for this project, with the Agency financing the acquisition ($3.5 million), architectural and engineering ($550,000) and cash contribution ($2 million) and the City handling the thirty (30) year debt service of approximately $720,000 a year. An obvious downside to this scenario from the City's perspective is the need to budget for the debt service ($720,000) for the next thirty (30) years, especially with lean General Fund budgets being the rule rather than the exception. An additional wrinkle to this scenario is that the Agency, with existing bond proceeds, pay the first 2-3 years debt service, allowing the City to better plan for this obligation and for an upturn in the economy. A twenty-five (25) year term of the above scenario would require annual debt service of about $767,000. -------------------------------------------------------------------------------------------------------------------------- KJH:lag:plcrm.agd COMMISSION MEETING AGENDA MEETING DATE: 05/10/1993 Agenda Item Number: J c DEVELOPMENT DEP~NT STAFF REPORT Financing of New Police Facility May 7, 1993 Page Number -2- o ------------------------------------------------------------------------------------------------------------------------- 3. SUBORDINATE TAX ALLOCATION BOND ISSUE ~YEAR TERM): This alternative would require $11,755,000 with the primary uses of the bond proceeds being the Construction Fund ($9.7 million), the Debt Service Reserve Fund ($810,070) and $1 million to finance furniture, fixtures and equipment. As noted earlier, this last number is a very rough estimate. This alternative also assumes, and includes, a $2 million up-front cash contribution by the Agency. The primary difference between this scenario and alternative #2 is that the Agency would bear 100% of the cost of the project, including an annual debt service averaging $808,000 and the aforementioned acquisition, architectural and engineering costs of $3.5 million and $550,000, respectively. The benefits from the City's perspective is that it gets a brand new purpose-built police facility at no cost to its General Fund. c From the Agency's perspective, however, we would be incurring additional bonded indebtedness with significant amounts of unexpended bond proceeds on hand, further limiting our ability to conduct business with private developers. Additionally, as noted above, the Agency would be incurring the entire cost of the new police facility, including acquisition, architecture and engineering, construction, furniture, fixtures and equipment and a $2 million cash contribution, plus acquisition of the existing police facility and the south side of Seventh Street ($500,000). Today, as outright cash payments, these items amount to $17,675,000. Having to finance the construction cost (includes furniture, fixtures and equipment) over twenty-five (25) or thirty (30) years would add $21 to $24 million to the initial cash outlay of $6,975,000. An anticipated benefit to the Agency would be the sale of the Pacific Federal Building for at least $2-3 million when the new police facility is constructed and occupied. A twenty (20) year subordinate tax allocation issue' would be the same as above, except that annual debt service would average approximately $856,000. Alternatively, twenty-five (25) and thirty (30) year issues without the $2 million cash contribution from the Agency would require annual debt service amounts approximating $993,000 and $1,052,000, respectively. 4. ASSESSMENT DISTRICT FINANCING: It is possible to form a City-wide assessment district as was previously done for street sweeping. Assuming a $10 million issue, for illustrative purposes, at a seven percent (7%) interest rate and a term of ten (10) years, preliminary discussions with the Real Property Section of the Public Works Department revealed an average annual assessment of approximately $17 for the 63,831 parcels currently on record in the City. The actual numbers would have to be refined if the Council was seriously interested in this alternative. -------------------------------------------------------------------------------------------------------------------------- c KJH:lag:plcfm.agd . COMMISSION MEETING AGENDA MEETING DATE: 05/10/1993 Agenda Item Number: ? o c c - DEVELOPMENT DEPn'MENT STAFF REPORT Financing of the New P~e Facility May 7, 1993 Page Number -3- o ----------------------------------------------------------------------------------------------------------------------- The benefits to this alternative are that the burden is spread equally among all property owners and beneficiaries with total costs to each property owner over the ten (10) year period approximately $170.00-$200.00 per parcel. This amount could be less if a provision could be included that would automatically apply to newly-annexed property as well. Additionally, neither the City's General Fund or the Agency would be obligated to finance the costs previously described. On the negative side, there will most likely be serious opposition that the Council could override and the construction schedule that has been set out would certainly be delayed, may be substantially so. Moreover, the Public Works Department would most likely have to front the district formation costs which we believe could be reimbursed by the bond proceeds. 5. USE OF EXISTING BOND PROCEEDS: Currently, there exists approximately $12.8 million in obligated but unexpended bond proceeds. These proceeds were obligated by the Commission at its March 7, 1992 Budget Workshop. The benefits of this scenario is that new indebtedness would not have to be incurred by the Agency (or City for that matter) and the existing indebtedness has already been properly structured and included in the current Agency budget. You would also immediately eliminate such high cost items as the debt service reserve fund, underwriter's discount and the cost of issuance as there would be no bond issue. This alternative would also facilitate the existing construction schedule. The downside to this particular alternative is that it would require a major re-ordering of the thirteen (13) priorities adopted by the Commission on March 7, 1992. Further, it would mean the Agency bearing 100% of the costs of the project as discussed earlier. The difference here, however, is that there would be no long-term financing or obligation of the Agency that would negatively impact future Agency budgets. 6. ANTI-RECESSIONARY LEGISLATION: In this alternative, staff would continue its activities with respect to the preparation of plan and specifications, in order to be job ready. Were the Presidents stimulus package to be resuscitated and passed by Congress, the new police facility could be financed as part of this initiative. The beneifts are that the City or Agency would not have to incur any costs over and above those already budgeted. -------------------------------------------------------------------------------------------------------------------------- KJH:lag:plcrm.agd COMMISSION MEETING AGENDA MEETING DATE: 05/10/1993 F) Agenda Item Number: r:t::. c c c ,." DEVELOPMENT DEPr'rMENT STAFF REPORT 0 Financing of the New ~e Facility May 7, 1993 Page Number -4- -----~-------------------------------------------------------------------------------------------------------------------- On the negative side, the project would be subject to the whims of Congress and Washington politics with no certainty of positive action. Additionally, the project schedule being closely adhered to by staff would have to be shelved with the result that the Police Department would have to remain in its existing facility for the foreseeable future. This would also prevent any significant development from occurring on the Superblock, delaying and possibly foreclosing on the possibility of any serious development desperately needed in the downtown Central Business District. Based upon the alternative listed above, the need to move the Police Department as soon as possible, the impact the demolition of the existing Police facility will have on future development, the need not to incur additional indebtedness on behalf of the City and Agency and the ability to adhere to the existing construction schedule, staff recommends the adoption of alternative #5. Staff recommends adoption of the form motion. ,>> KENNETH J. ENDERSON, Executive Director Development Department ------------------------------------------------------------------------------------------------------------------~----- KJH:lag:plcfm.agd COMMISSION MEETING AGENDA MEETING DATE: 05/10/1993 Agenda Item Number: ?