On January 25, 2011, the Turlock City Council unanimously voted the issuance of $25 million in Redevelopment Agency (RDA) bonds at an increased interest rate cap of 8.5 percent, yielding net proceeds of $11.5 million to $14 million, to help pay for a new $28 million public safety facility to replace the old police station comprised of two out-of-date 50 year old buildings and portables.
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 in total.
The City Council’s previously approved construction project funding mechanism included an expected $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.
At the 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 a bond made funding the project even more difficult and ultimately stalled out the project.
Turlock City Manager Roy Wasden said then, “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 City of Turlock was expecting low bids due to the economic climate in the construction industry.
City Engineer Mike Pitcock said at the same meeting that only one of the 17 bids opened that same day came in at the expected 25 percent under estimated range while the rest came in at about 6 percent below estimated costs.
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.
An RDA report presented at the November 9, 2010 meeting noted that the total estimated amount of tax increment revenues allocated to the Agency from the project area necessary to pay debt service on the proposed bonds would be approximately $51 million (assuming an aggregate initial principal amount of approximately $24.1 million, a true interest cost of 5.65 percent, and a term of the bonds of 30 years). This would have raised an estimated $18 million in from bond proceeds for the public safety facility project.
On January 11, 2011 the Turlock City Council unanimously voted to issue up to $25 million in bonds with an interest rate cap of 7.25 percent, increased from an initially proposed 6.75 percent due to the volatile municipal bond mark.
The issuance of $25 million in bonds at a 6.75 percent would have yielded the City a net of $15 million, $14 million at 7.25 percent, to put toward the financing of the public safety facility project while paying the debt off over 30 years.
While the vote was unanimous, Councilwoman Mary Jackson and Councilman Forrest White agreed there was concern with the affordability of the project’s financing.
"I’ll be honest, I’m just really, really leery about this," said Councilwoman Jackson. "I do not want us to build this and not be able to pay for the staff to work in it."
Councilman White said, “I’m of the opinion that you roll the dice, and we’ll all live with the consequences right or wrong."
The Turlock Unified School District (TUSD) Board voted to a assume some of the risk by subordinating their right to School District’s share of tax revenue raised by the RDA property values if the City was unable to repay the bond debt with only the City’s share of tax revenue.
“By cooperating and agreeing to the subordination agreement, the City will hopefully be able to issue bonds for the construction of the safety center at a much lower cost to the taxpayers of Turlock,” said TUSD Board President Frank Lima.
The agreements by RDA tax revenue sharing agencies such as TUSD or Stanislaus County help assure potential investors of a lower risk and may help keep the interest rate needed to be offered lower, meaning the City may benefit from more proceeds.
Stanislaus County Management found concern with the City’s ability to pay debt when the City of Turlock was originally trying to get $30 million and denied to risk the County’s share of tax revenue in the event the City was not able to pay the bond debt.
“After discussions between City, County, and RDA representatives, the debt proposal was reduced from $30 million to $15 million, and the previous finding that the agency could not reasonable be expected to pay their obligations was no longer relevant,” said Stanislaus County CEO Richard Robinson in a January 11, 2011 staff report to the Board of Supervisors.
The Stanislaus County Board of Supervisors voted unanimously to subordinate AB1290 payments and tax increment pass-through payments to support a RDA debt issuance, not to exceed $15 million in net project funding.
Matters were only more complicated as the day before the January 11th Council Meeting, California State Governor Jerry Brown presented his proposed State Budget which calls for doing away completely with the Redevelopment Agency. Agencies such as the Turlock RDA would be allowed to use property tax revenue from their defined RDA agencies to pay for previously incurred debt but that after July the State would keep the tax revenue once paid out to RDA’s.
At the January 25, 2011 Turlock City Council Meeting, City Engineer Mike Pitcock gave a public safety facility update that included a report that some of the rebid areas of the project came in at $170,000 more.
While Pitcock reported that if the bids aren’t awarded at the beginning of February, rebids could again increase the cost of the public safety facility by hundreds of thousands of dollars, if not a million dollars.
Along with the threat of increased construction costs, City Council was presented with a report that an increased interest rate may need to be offered to push the sale of the bonds.
From the October 27, 2010 RDA report, issuance of bonds went from a proposed $24.1 million with an interest rate of 5.65 percent and a net proceed of $18 million to the January 25, 2011 City Council Meeting when City Staff requested an approved issuance of $25 million in bonds with an interest rate cap of 8.5 percent, raising from $11.5 million to $14 million in proceeds (depending on the interest rate needed to sell the bonds).
30 year resident of Turlock Daniel McCally believed that while the people may be going to the polls in June to vote on a tax issue, that maybe the people should decide on whether or not they want to go into debt for the new public safety facility project.
“Not all of us think that this really needs to be done,” said Daniel McCally. “What’s the matter with asking the people if they really want to spend this money?”
City Manager Roy Wasden said “The decision to build this facility is a long time ago made.”
“That whole discussion about do it or don’t do it, that’s way over,” “So the only question is how and what time table are you going to go forward and complete it that’s the most advantageous.”
Citizen David Arakelian didn’t plan on speaking but to address the City Manager’s statement said, “To hear you say that it’s done and it’s not even up for discussion, flies in the face of reality. The State is technically broke, the country is questionably broke, to say that a decision to encumber the City of Turlock with a $28 million obligation is not even up for discussion is not realistic.”
“No matter how, who, what, or where, we as the citizens of this city are on the hook for it,” said Arakelian. “And if we’ve come across the point in time when the best of ideas simply can’t be afforded, you as our leaders, as our representatives, and as our spokesmen, have to have the wherewithal to say ‘in my opinion, great idea, wish we had the money, but I don’t feel right about it.”
Former Turlock School Board Member and 2010 Turlock City Council Candidate Timm LaVelle agreed with Arakelian about the concern of funding issues.
“I’m very concerned with many things I’ve heard here again tonight, one is we have to do it now, time limit is there… we heard that a couple years ago, we had to get that field put in before January 1st because things were going to change,” LaVelle said.
“I heard at the last meeting, bids might go up a couple hundred thousand, they might go up a million, here we know we’re losing millions (with the rate increase),” stated LaVelle. “You guys are scaring me, you guys are scaring me that you’re encumbering this city, draining every dime and every nickel from anything and everything out there.”
Chief of Police Gary Hampton clarified, per Vice Mayor Amy Bublak’s request, that the new public safety facility project is not a desire, but a need.
“It would literally take me an hour and a half to two hours to take you through a recap of the last four years (of this project).”
The Police Chief explained that the two main police station buildings are both over 50 years old, outdated, and have a jail out of compliance.
“We have an inadequate and uninhabitable evidence facility that has all kinds of federal and state problems that I’m not going to discuss openly in this venue,” said Police Chief Hampton. “There are not only problems with compliance with the judicial system, but there are problems with Cal OSHA, State Labor Code, and all kinds of stuff. I can tell you that our employees cannot inhabit our former facility.”
Councilwoman Mary Jackson once again brought up her concern over funding issues, the same that she had at the previous Council Meeting, but was more concerned with the increased construction bids and higher interest rate cap.
“We could lay off every other city employee and with our $2.5 million deficit we’d still have to cut into our police and fire, that is my concern, and that is truly my concern,” said Councilwoman Jackson. “It’s people versus building.”
“I’ve asked for any other options. I’m leery, I have a lot of uncertainty,” said Councilwoman Jackson. “I agree with these community members; I have some concerns.”
The Turlock City Council voted 4-1 (Councilwoman Jackson was in opposition) to approve the issuance of $25 million in bonds on January 27, 2011, with an interest rate cap of 8.5 percent, raising from $11.5 million to $14 million in proceeds (depending on the interest rate needed to sell the bonds).
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