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Public Safety Facility funding hits snag

POSTED November 9, 2010 11:14 p.m.

A combination of higher-than-expected construction bids and three agencies’ concerns over a payment agreement forced the delay of a planned $20 million bond issuance to fund a new Turlock Public Safety Facility at the Turlock City Council meeting Tuesday night.

“We don’t think all is lost by any means,” Turlock City Manager Roy Wasden said.

Initial signs were positive for the project, when a bid opened last week for offsite work came in 25 percent below engineers’ estimates – on par with projections, due to the current construction climate. But when the City of Turlock opened the remaining 16 bids for the project Tuesday, bids were just 6 percent below estimates. The difference places the total project cost at approximately $27 million, well above the $24 million identified in funding.

The two-story, 57,570 square foot future home of Turlock’s Police and Fire departments was to be funded with $13 million in new redevelopment agency bonds, $3.2 million of existing redevelopment agency funding, $4 million from Capital Facility Fees, $1.3 million in state Proposition 1B grant funding, and $2.5 million from the sale of the existing police department site on Palm St. The project is planned for a 4.6 acre site adjacent to the rebuilt Carnegie Arts Center; the City has already acquired all of the land, save for the site of Pizza Hut.

Turlock City Engineer Mike Pitcock said the city will work to obtain a better price in the coming weeks by exploring “Value engineering,” possibly using less expensive materials or removing some design elements. The city will also likely rebid a few elements of the project which received only a single bid in search of lower costs. In the meantime, Turlock will contact the existing low bidders to see if a bid extension can be obtained, locking in the price for an additional 30 to 60 days while the city determines if the project is feasible.

The other stumbling block for the project lies in arcane redevelopment law.

Redevelopment agencies receive property tax revenue as property within a designated RDA area increases in value, compared to the value of the property when the area was first created. But to ensure other taxing entities receive their fair share of tax dollars – including the Turlock Rural Fire Department, the Turlock Mosquito Abatement District, and Yosemite Community College District – those entities must agree to subordination agreements prior to bonding, providing passthrough tax revenues.

“What’s happened in this process, partly because of the environment we’re in with declining property revenues and partly because we’re issuing to our capacity, three agencies have questions,” Turlock Senior Accountant Marie Lorenzi said.

“They want more money,” said Turlock City Councilman Ted Howze.

Stanislaus County has given formal written notice to the City that, based on the size of the proposed bond – which would max out the Turlock RDA’s bonding capacity – they would not support the issuance, fearing debt service payments could cut into their passthrough revenues. The County and Turlock have calculated different starting figures for the value of assessed RDA property, and also have reached different passthrough percentages.

“The percentages are different enough that it makes me ask the question, ‘Help me understand this,’” Lorenzi said.

The City is currently in discussions with the County to reach some sort of agreement and common ground on the numbers. City staff is also working with the Turlock Unified School District, which had concerns over the size of the bond, and Chatom Union School District, which asked for clarifying information but has not responded negatively. Both school districts have until Nov. 29 to formally respond to the bond issuance.

Though concerns forced the Council to take no action on the proposed bond issuance, the City received the good news that their RDA bond rating remains a strong BBB+, confirmed by Standard and Poor’s last week.

The clock is ticking on the bond issuance, however, as bond markets become crowded toward the end of the year. If Turlock doesn’t issue bonds by the second week of December, the project will have to wait until January, according to bond underwriter Eileen Gallagher with Stone & Youngberg.

Given the 30 year lows seen in the municipal bond interest rates and the good bid climate – despite the higher than expected bids opened Tuesday – the City of Turlock hopes to continue with the Public Safety Facility despite the setbacks.

“We think this is an important time for us to push forward and get this issue resolved,” Wasden said.

To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.

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