The Turlock City Council unanimously approved at the September 13, 2010 Turlock City Council Meeting to authorize the advertisement for construction bids for the new Public Safety Facility and to authorize staff to proceed with necessary steps to facilitate a bond issuance for partial financing, and to authorize staff to take necessary action to list for sale the existing Police Facility.
The future Public Safety Facility, to be located next to the renovated Carnegie Arts Center at Broadway Avenue and West Olive Avenue, will house the Turlock Police and Fire Departments. The new 57,500 square foot, two-story Public Safety Facility to sit on a 4.6 acre lot has been estimated to cost $35 million.
The City Council’s approved funding mechanism includes $13 million in new Redevelopment Agency (RDA) bonds, $3.2 million of current RDA funds, $4 million of Capital Facility Fees, $1.35 million in Prop. 1B funds, and an expected $2.5 million from the sale of the existing police station on Palm Street, off Canal Dr.
The total $24.05 million in earmarked funding is short of the estimated $29.6 million needed to finish construction.
At Tuesday’s, November 9, 2010 Turlock City Council Meeting, financing issues with higher than expected bids and unsettled agreements with other tax sharing agencies that may be impacted by the issuance of bonds made funding the project even more difficult and ultimately has stalled out the project.
“This has been one of those difficult days,” said Turlock City Manager Roy Wasden at Tuesday night’s City Council Meeting. “We had good news that our bond rating came in at a BBB+ with a stable outlook which is very positive for our ability to bond but the bids on the public safety center did not come in at the numbers that we had hoped that they would.”
The first bid, which was for the off-site work, was opened last week and came in at 25 percent under the estimated cost which was inline with the City’s expectations given the current construction climate due to the economy.
“It’s unfortunate that when we actually opened the other 16 remaining bids today, that they came in at about 6 percent below estimate, we were hoping for that 25 percent range,” said Turlock City Engineer Mike Pitcock.
The total bids came in at $23.9 million, and with all the costs on that, brings the project cost to about $27 million. The City’s funding plan had earmarked about $24 million for the new Public Safety Facility project.
Pitcock said that City Staff will be going back to look at rebidding some areas, value engineering that provides what Police and Fire need but maybe at a lesser scale, and soft costs to be more efficient while also contacting the low bidders for requests of guarantee price extensions.
“We don’t think all is lost by any means,” said Wasden. “We know there’s work to do on the bids… as well as on the funding side of the equation.”
Wasden went on to say “Right now today, there’s plenty of room in our capacity to bond on all analysis to cover the increase cost.
The City had put their budget together with $13 million in bond proceeds while a recent assessment of the expected bond yield is at $18.4 million range.
Redevelopment Agencies formed receive revenue from property value tax increases within the RDA area. The increase is calculated from a base, when the RDA area was formed, and as property value increases that generates incremental revenue acting as a debt payment source.
Other taxing entities receive some of that property tax revenue such as Stanislaus County, Turlock Irrigation District (TID), Turlock Rural Fire District, and Turlock Unified School District (TUSD). There are two ways these entities share property tax revenue in an RDA area with the City, by standards set forth by law or negotiated contract.
Both have provisions that include notifying the taxing agencies by letter showing that the city has enough projected revenue to not only satisfy our debt service payments but pay them their pass-through payments. The City has given each entity 45 days to respond or it will be assumed they do not object to their subordination agreement.
“What’s happened in this process, partially because of the environment that we’re in right with declining property values and also because we’re looking at potentially issuing to our capacity, three of the taxing entities have had questions on our calculations for the pass-through payments and how it would effect them,” said City of Turlock Senior Accountant Marie Lorenzi.
Chatom School District has asked for clarifying information but has not responded negatively.
TUSD has not given any written formal notice as of yet, but has been in communication with the City about concerns with the size of the bonds and the things that they need to guarantee with their pass-through agreement.
Stanislaus County has given written formal notice that based on the initial sizing of the bond, which was the maximum debt the city could issue according to the city’s analysis, that they would not subordinate but would be open to reviewing the numbers.
Councilman Kurt Spycher asked for public clarification as to what the County’s issue was.
“We felt there were material differences in what those numbers that they came up with and what the numbers that we were historically accurate, and that we feel are very accurate,” stated Wasden.
Councilman Howze interjected with “They want more money.”
Lorenzi reported that the County’s starting numbers were so far off from the City’s that it made her say “Help me understand this.”
“It’s easy to understand,” said Councilman Howze. “The State has robbed counties and cities blind so the County is looking at the only person they’re going to go to for money and that’s going to be the cities. So I don’t know what’s tough to understand, they want our money.”
Entity with subordination agreements have 45 days to respond to the letters the City of Turlock sent out in regards to the RDA financing for the new Turlock Public Safety Facility project and the deadline to respond is November 29, 2010.
The Turlock City Council took no action, stalling out the project. Updates will be given at every Council meeting until Council action is needed. Due to the crowded end of year bond market, if the issuance of bonds can’t happen by mid December, the City may have to wait until January.
“We’re going to do everything we can to move this forward as quickly as possible,” said City Manager Wasden.
“We know the bid climate is very, very good. We know the bond climate is very, very good. We think this is an important time for us to push forward, get the issues resolved and get this project underway.”