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Public Safety Facility back on track, despite bond issues

POSTED January 11, 2011 10:58 p.m.

Turlock’s oft-delayed Public Safety Facility is one step closer to becoming reality. On Tuesday night, the Turlock City Council unanimously approved issuing municipal bonds through the city’s Redevelopment Agency to fund the majority of the $28 million project.

But while that vote was unanimous, many issues have yet to be addressed before the City of Turlock can break ground adjacent to the Carnegie Arts Center on the two-story, 57,570 square foot future home of Turlock’s police and fire departments.

“Aye… With reservations,” said Councilwoman Mary Jackson as she cast her vote.

As the City Council approved the bond issuance, the full final cost of the development remained unknown.

Project bids were opened in November 2009, but those bids were good only for 30 days. When the Turlock City Council’s initial, Nov. 9, 2010, attempt to proceed with the bond issuance was placed on hold due to issues reaching subordination agreement with local taxing agencies, the city asked the top bidders to extend their bids through Feb. 2 while Turlock secured financing.

Ten of the 16 bidders agreed to extend those bids, five declined, and the City of Turlock opted to rebid one bid which came in far above estimates. That one bid has been opened, with the new offer saving Turlock a few hundred thousand dollars. But the remaining five won’t be opened until Thursday, meaning the $28 million cost could rise or fall as bids are opened Thursday afternoon.

Even once the costs are nailed down, funding the full cost could be a challenge.

The City of Turlock has $8 million in funding locked down for the project. Of the remaining approximately $20 million, $2.5 million would come from selling the existing Turlock Police Department facility on Palm St.

The bond, as approved Tuesday, is expected to raise between $14 and $15 million. The final amount raised will vary based on interest rates, which have considerably worsened since November. Municipal bond investors have been pulling cash out from funds, decreasing demand for new offerings.

“With a decrease in demand it costs us more to issue,” said Turlock Senior Accountant Marie Lorenzi. “People want to be paid more for taking the risk on our bond.”

As originally proposed, the bond issuance would have been capped at 6.75 percent interest, raising about $15 million. This week, due to the poor bond market, underwriters asked the Turlock City Council to approve a cap of 7.25 percent interest, raising just $14 million.

Turlock won’t know exactly how much they’ll get from the bond until the final week of January, when it is priced by investors and the underwriters. The City of Turlock will expend more than $15 million on the bond issuance, factoring in all related fees, but no more than $25 million. Any excess bonding capacity will be used to refinance 1999 RDA bonds, should it be economical.

The bond issuance still awaits final approval from the Chatom Unified School District and Stanislaus County, who must agree to tax revenue subordination agreements with the Turlock RDA. Under RDA law, other area taxing agencies must agree to an RDA bond issuance, as the RDA would be entitled to its share of tax revenue before the other agencies; waiting on those subordination agreements put the Public Safety Facility on hold in November.

The City of Turlock received a signed agreement from the Yosemite Community College District on Tuesday, and the Turlock Unified School District Board of Trustees agreed to subordinate Tuesday night. According to Lorenzi, both the County CEO and CUSD Superintendent will be recommending subordination.

“Unless something goes sideways from here to next Tuesday, we’re subordinated with all of the taxing agencies,” Lorenzi said.

In a new twist revealed Tuesday, the approximately $2.5 million remaining unaccounted for in the $28 million cost would be paid for through the existing Capital Facility Fees program. No funding had previously been identified for that portion of the cost.

The CFF program works by charging developers a fee based on the costs of city infrastructure, effectively burdening developers and ultimately consumers with that cost. The cost will be rolled into the CFF program as part of the ongoing General Plan Update, which is revising the CFF. The new plan calls for higher housing densities, meaning each buyer would shoulder a smaller burden of the total cost.

“We’re hopeful that, on a per house basis, it will not affect the overall cost,” said City Engineer Mike Pitcock.

As CFF funding is entirely reliant upon new development – a rarity in the current economy – Jackson wasn’t fully convinced that funding would materialize for the PSF.

“I’m just a little cautious about that,” Jackson said. “I’m actually cautious about a lot of things right now after hearing the proposed state budget.”

The proposed state budget, announced Monday by new Governor Jerry Brown, threw an additional wrench in the project by suggesting the elimination of Redevelopment Agencies, statewide, effective July 1.

Under Brown’s proposal, existing, contractually obligated RDA debt would be honored, but all other money would fund obligations previously paid by the state. Brown also requested legislation be passed to prohibit RDAs from entering any new contracts or obligations, prior to the July 1 elimination of all RDAs.

 Many details of the plan are still uncertain, but RDAs face a potential “use it or lose it” scenario.

“At this point nothing would surprise me, good or bad,” Lorenzi said.

Turlock’s RDA faces another imminent deadline, as the agency can only issue new bonds for its initial redevelopment area until 2013. This bond issuance would effectively take the Turlock RDA to its bonding capacity for the remainder of its operational life.

While details have yet to be locked down, Turlock is in desperate need of a new Public Safety Facility, according to city staff.

The current Police Department – more than 50 years old – does not meet state-mandated design standards for such facilities. Updating the existing facility would cost between $38 and $42 million dollars, well above the cost for the new facility.

In anticipation of the new structure, all maintenance has been deferred on the existing Police Department for the past 2.5 years, leading to issues with the roof and security system.

“It feels like this is the time to move this project forward and lock down these costs so they don’t run away from us,” City Manager Roy Wasden said.

With pressing need, and the possible elimination of all redevelopment agencies, the council expressed regret for some recent, unnamed RDA expenditures.

 “I feel somewhat guilty that we participated in spending the other RDA funds on luxuries … when we still have what is a necessity,” Vice Mayor Amy Bublak said.

The council will also continue to look at other sources of funding for the remaining gap, including possible federal financing.

“I am going to [Washington] D.C. next week with my hands out,” said Mayor John Lazar.

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

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