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HomeMy WebLinkAboutItem A - Nov.2004 Bond IssueEUGENE CITY COUNCIL AGENDA ITEM SUMMARY Work Session: November 2004 Bond Issue Options Meeting Date: July 21, 2004 Agenda Item Number: A Department: Central Services Staff Contact: Dennis Taylor www. cl. eugene, or. us Contact Telephone Number: 682-5010 AGENDA ITEM SUMMARY The purpose of this work session is to request City Council direction on a potential Civic Center bond measure for the November 2004 ballot. BACKGROUND Council Action History On November 17, 2003, staff presented the Multi-Year Financial Plan to the Budget Committee. This plan identified both the capital and operating needs for the entire organization over a six-year period. On November 19, 2003, the council held a work session on sequencing of financial measures to be presented to the voters. The staff materials for that work session indicated that a bond measure for a Police building would be the next potential item to be presented to voters in November 2004. A parks, recreation, and open space bond measure was being considered for the November 2006 ballot. The council discussed the materials, but did not provide any direction. On July 14, the council held work sessions on the Civic Facilities Visioning Committee Report follow- up and on the parks, recreation and open space bond issue discussion. The results of that work session were not available at the time of writing this agenda item summary. Policy Issues Should the council place a bond measure on the November 2004 ballot? Council Goals The civic center project relates to the council goals of an effective, accountable municipal government, a safe community, sustainable community growth and change and to fair, stable and adequate resources. Financial and/or Resource Considerations Three options for the Community Safety Building were developed to meet different building sizes and financing objectives. In addition, there are a number of elements identified by both the Civic Center Design Charette and the Mayor's Committee that could be included in the project. These elements include additions to the Community Safety Building and open space and pedestrian amenities to enhance 8th Avenue as Eugene's Civic Street. A fourth option would fund a full consolidation scenario for City L:\CMO\2004 Council Agendas\M040721\S040721A. doc Hall, as well as the full-size Community Safety Building (minus the Property Control and Forensic Evidence units), but would not include any of the other Civic Center amenities recommended by the Committee. The following table summarizes the main elements of the four options for a Civic Center development and related improvements. A more detailed description of each of the project elements and costs is included in Attachment B. A comparison of each of these options with the Civic Center Vision design principles is included in Attachment C. Component Option A Option B Option C Option I) City Hall Building Full consolidation City Hall scenario, w/parking for 2020+ need Community Safety Base building w/parking, back-up 911 2008 need 2018 need 2028 need 2020+ need ..... !}~[!.!.C~[!g ........................................................... ~.~!t.~[.~!~C[.~.!X!.q...St~[..~!!/P.~ .......................................................................................................................................................................................................................................................................................... Move property and forensics ..................................................................................................... c~py~r~[pT([!...~!~c[.~p~E~{~.!...pp.~...[p...P~r~!c~ ............................................................................................................................................................................................................................................. Civic Center Social service agency space and -- 15,000 sf 20,000 sf 20,000 sf ..................................................................................................... ppt~.!.!.q...!!/~.~[!r~g.?p.rp5 ................................................................................................................................................................................................................................................................................................................. ..................................................................................................... ....................................................... r.r ............................................... ................................................. ..................................................... r.r .......................... ..................................................................................................... ........................................................................................ r.: ............................................... ................................................. ..................................................... r.r .......................... Improve park blocks and make civic street improvements $28.2 $41.7 $51.2-51.5 $111.5 Total Project Cost million million million million It is possible to pay for a new Community Safety facility without any additional funding approved by the voters by using $28.2 million in internal funds. The project would meet current needs only, and would not include any of the Civic Center amenities at this time, although those additional elements could be pursued later. The council could ask voters to contribute to the project to increase the facility size and add some of the amenities, and/or to add replacement of City Hall. Five financing plan options are described in Attachment D. Options A through C1 and Option D use the maximum amount of internal cash to reduce or eliminate the additional contribution from the taxpayers. The internal funding consists of the Facility Reserve, limited tax bonds, deferred revenue from the Tele- communications Tax lawsuits, deferred revenues from right-of-way payments in the General Fund, Urban Renewal Agency funds, sale of assets, interest earnings, and other miscellaneous sources. In op- tions B through D, General Obligation ("GO.") bonds are used to enhance the facility and add amenities recommended by the Mayor's Committee. The use of the deferred revenue from the Telecommunications Tax lawsuit and from right-of-way payments in the General Fund carries some risk. Those funds are the subject of legal action and may need to be returned to the companies that paid the taxes. The City is in a good position to think that those funds will be available, however. If the lawsuits are unfavorable to the City, staff will need to return to the council with a back-up funding plan. In the interim, design could begin, but the City will not sign a construction contract until the funds are available. A summary of the financing plan options is set out in the following chart. The tax rate in Year 1 would range from $0.16/$1000 of AV to $0.88/$1000 of AV. The average taxpayer impact in Year 1 would range from $26 to $144. The tax rate and taxpayer cost would go down over time, with the 20-year L:\CMO\2004 Council Agendas\M040721\S040721A. doc average being less than the first year cost. The Budget Committee recently approved revised debt policies that set a limit on net direct debt of 1.0% of real market value. After issuance of the debt for this project, the City's net direct debt to real market value in FY10 would range from 0.3% to 0.6%, which is under the policy limits. Option A Option B Option C1 Option C2 Option D GO Bonds -- $12,620,000 $22,050,000 $47,775,000 $70,820,000 Internal Funds $28,186,000 29,133,000 29,200,000 3,715,000 40,649,000 Total Funding $28,186,000 $41,753,000 $51,250,000 $51,490,000 $111,470,000 Taxpayer Cost - 1 st Year -- $26 $45 $97 $144 Net Direct Debt - 1st Year 0.4% 0.5% 0.6% 0.8% 0.98% In addition, there will also be increased operations and maintenance cost for the facilities. Preliminary estimates range from $1.1 to $1.7 million annually for the Community Safety facility and $3.0 million for City Hall, depending on the size of the facility. There will be some funds available to offset the increased O&M costs. It might be necessary, however, if there are no significant changes in the fiscal health of the General Fund, to reallocate General Funds to pay the net increase in O&M when the facilities are complete. Other Background Information None. Timing The council was scheduled to discuss the Civic Center plan and a possible parks, recreation, and open space bond measure on July 14. Continued discussion of a November ballot measure will occur on July 21. If a financing plan is adopted that requires a bond measure, the council will need to take final action on a resolution by August 9, 2004, to place a measure on the November 2004 ballot. The council agenda includes a meeting on July 26 for this purpose. OPTIONS 1. The council may direct staff to prepare one or more bond measures for the November 2004 ballot. 2. The council may decide not to place a measure on the November 2004 ballot. STAFF RECOMMENDATION The staff recommendation is to place the Option B Civic Center bond measure on the ballot, as described in Attachment B. This would mean asking voters to approve a $12,620,000 General Obligation Bond request. S[IGGESTED MOTION Move to direct staff to develop a bond measure for the November ballot based on the Civic Center Option B, as described in Attachment B. L:\CMO\2004 Council Agendas\M040721\S040721A. doc ATTACHMENTS A. Council Action History on Downtown Space Plan B. Options for Civic Center Design Components C. Comparison of Civic Center Design Components to Policy Principles D. Proposed Financing Plan for the Civic Center Vision E. Summary of Financial Goals and Policies to Guide Funding of the Civic Center Vision FOR MORE INFORMATION Staff Contact: Dennis M. Taylor, City Manager Telephone: 682-5010 Staff E-Mail: dennis.m.taylor~ci.eugene.or.us L:\CMO\2004 Council Agendas\M040721\S040721A. doc ATTACHMENT A Council Action History on Downtown Space Plan On April 11,2001, council was presented with the concept of developing a long-range plan for replacing downtown office space. The plan included both potential short-term and long-term actions. Council directed staff to research a variety of ways to procure City buildings, including design/build, and report back to council before planning new City buildings. On April 25, 2001, council was offered several potential short-term actions to create a safer, more efficient environment for staff currently located in City Hall. Council directed the City Manager to (i) develop programming, space needs and site requirements for relocating certain police functions; (ii) develop a long-term master plan for future use of the property in Roosevelt Yards by the Police and Public Works Departments and a financial plan for implementation, including consideration of redevelopment options for more efficient land use; (iii) dedicate the proceeds from the sale of four surplus properties to the Facility Reserve; and (iv) identify and recommend an appropriate downtown site for purchase for Fire Station #1, with a report back to council with final site selection prior to purchase. On May 16, 2001, council directed the City Manager to develop a financial strategy and implementation plan for replacing City Hall and other downtown City office space with new buildings. Council's direction included: consideration of possible joint development with other agencies; consolidation; locations along 8th Avenue from Oak Street to the river as well as possible sites for joint development with other agencies; and, potential for use of some of the warehouse and historic structures east of Mill for some City functions. The 2001-2002 Council Goals included an action priority to "Develop a strategy and implementa- tion plan for City downtown office and public safety facilities." One of the three specific work items included in this action priority was to adopt a policy framework for long-range plans to help guide decisions on reinvestment in existing City buildings downtown. A policy for the maintenance and preservation of City Hall and the Public Works Building was presented to Coun- cil on July 5, 2001. This policy reduced the level ofreinvestment in both buildings to provide only for an expected 8 to 10 years of continued use. On September 19, 2001, council addressed both near-term and long-term projects by directing that relocation of Special Operations and EPD personnel in the basement of City Hall, and relocation of Fire Station #1 be the first priority of projects proposed in the Downtown Space Plan. Construction of a new Police Services building and City Hall were the next tier of projects, with design for the Police Services building projected to begin in FY05, and a replacement of City Hall was targeted to begin design in FY08. The September 19, 2001 council agenda item on funding the Downtown Space Plan included a description of internal and external funding sources to implement the eventual replacement of City Hall with new buildings. Council approved the staff recommendation that the projected funding gap be met with a combination of the dedication of additional General Fund resources and General Obligation Bonds. One of the proposed internal mechanisms, the payment of market based "rent" by services that would be located in new downtown buildings, was the topic of a follow-up work session on November 26, 2001. The "market rent" concept was incorporated as an on-going City practice beginning in the adopted FY03 Budget. L:\CMO\2004 Council Agendas\M040721\S040721A-atts.doc On February 25, 2002, council approved a resolution to fund the construction of Fire Station #1 primarily with General Obligation Bonds, and City resources for non-bond eligible capital costs. At a May 22, 2002, work session, council approved the location of the Roosevelt Police Facility, a financing plan over two fiscal years using City resources from the Facility Reserve, and the use of a Construction Manager/General Contractor (CM/GC) form of construction management. Council adopted funding elements for the Roosevelt Police Facility on FY02 Supplemental Budget #3 and on FY03 Supplemental Budget #1. Some of the assets originally to be dedicated towards Downtown Space Plan projects have been used for other purposes. The adopted FY04 budget included a transfer of $900,000 from the Facility Reserve to help balance the General Fund. In addition, on July 23, 2003, council adopted a financing plan for a new Santa Clara Fire Station #11 that dedicated revenues from the sale of the three surplus fire stations to this project, rather than to the Downtown Space Plan projects. Similarly, on August 18, 2003, council directed that the proceeds from sale of the Kaufman Annex be deposited in the Kaufman Trust Fund, for support of the Kaufman Center. As a result of these actions, the sale of these surplus assets is no longer an element of the Downtown Space Plan. On October 29, 2003, council held a work session on the Downtown City Space Plan, focusing on the need for a new Police services building. Council directed staff to bring more specific rec- ommendations back on the preliminary planning, cost and financing of a new Downtown Police Services building and a City Hall, including financing options. During the work session, council- ors expressed the desire to have more information on how a new Police building would fit with future plans to replace City Hall, and to develop a more general "civic center" concept. On November 17, 2003, staff presented the Multi-Year Financial Plan to the Budget Committee. This plan identified both the capital and operating needs for the entire organization over a six-year period. The police building was listed as a high priority need in the MYFP, and replacement of City Hall was also included as a future project. On November 19, 2003, council held a work session on sequencing of financial measures to be presented to the voters. The staff materials for that work session indicated that a bond measure for a Police building would be the next potential item to be presented to voters in November 2004. Council discussed the materials, but did not provide any direction. On February 25, 2004, council held an informational work session on the Civic Center Design Charette and the Mayor's Civic Facilities Visioning Committee. On April 28, 2004, an informational work session was held to update council on the Mayor's Civic Facilities Visioning Committee and on financing plan options, borrowing methods and con- struction methods that could be applied to a new police facility. In a May 10, 2004, work session, council reviewed the Downtown Work Plan implementation strategies and project examples included in the Downtown Plan. The Downtown Work Plan con- sists of a list of policy statements, many of which relate directly to future Civic Center development. L:\CMO\2004 Council Agendas\M040721\S040721A-atts.doc On June 16, 2004, council reviewed the report of the Mayor's Civic Facilities Visioning Com- mittee and asked that a public hearing be held on the proposed policy principles that would guide future Civic Center development. A public information session was scheduled for July 8 and the public hearing for July 12. The results of the public information session and the public hearing were not available at the time of writing this staff summary. L:\CMO\2004 Council Agendas\M040721\S040721A-atts.doc ATTACHMENT B Options for Civic Center Vision Design Components Three basic options for the Community Safety Building were developed to meet different space needs and financing objectives. In addition to three base building options, there are a number of elements that could be included in the Community Safety Building project identified by both the Civic Center Design Charette and the Mayor's Civic Facilities Visioning Committee. These ele- ments include direct additions to the Community Safety facility, and open space and pedestrian amenities to enhance 8th Avenue as Eugene's Civic Street. A fourth option would be to fund the replacement of City Hall in addition to the full size Community Safety Building, and delay funding some of the other Civic Center amenities at this time. In all cases, the Civic Center projects would be designed to leave expansion room on each site for future development. Civic Center Sites In order to take advantage of property currently owned by the City, all options assume that the Community Safety Building would be constructed on the lA block site on the south side of 8th Ave- nue, between Pearl and High streets, directly across from City Hall. Option D assumes that the City Hall would be redeveloped on the current site. The facilities would use only a portion of their sites, in order to provide room for expansion in the future, although one level of underground parking for the full site is included in all options. Option A - Meeting Current Needs The "base case" Option A would be construction of a Community Safety Building that could be funded entirely with internal City resources. Under this option, a 67,000 square foot building could be constructed, which would accommodate current Police needs and include a back-up 911 Center. This facility would be almost twice the size of the space currently occupied by Police in City Hall. The Police Forensic Evidence and Property Control Units (FEU/PCU) would remain at Roosevelt and Garfield. After evaluating how operations are affected by having this function located outside the downtown area, a future phase could bring this function back downtown if it is considered desirable. No additional space would be provided at this time for social service agencies, additional public meeting rooms or expansion beyond 2008, although those items could be done separately or in a future Civic Center phase. "Great Street" pedestrian improvements to 8th Avenue would be limited to the block-long segment on the south side of 8th occupied by the new Community Safety Building. The total cost of this "base case" option is estimated at just over $28 million. The biggest advantage of Option A is that the City can relocate the Police Department into a safe facility without requesting additional revenue from the public. While this option does not include space for social services or public agency partners at this time, the site has room to construct expansion space to meet future City and non-City needs. The major disadvantage is that a number of the Civic Center Vision policy principles, such as consolidation of services, co-location with social service providers, and providing room for future expansion, are not supported by the initial construction of a smaller facility. Also, except for the one-half block fronting the proposed site, none of the "Civic Street" amenities called for in the Downtown Plan or included in the Civic Center Vision would be funded in this option. L:\CMO\2004 Council Agendas\M040721\S040721A-atts.doc Option B - Combining Near-Term Space Needs plus Civic Center Amenities The mid-range Option B is a 92,000 square foot building which includes 77,000 square feet to support Police functions through 2018, plus 15,000 square feet of general office space to accom- modate partnerships with social service agencies. The social service agency partners would be responsible for tenant improvements, and would pay the O&M costs but not the capital cost for their space (since the voters would pay the capital costs through the GO Bond). The building components of Option B are estimated at about $31.2 million for Police functions and $2.6 million for addition of office space to support service partnerships. Additional project elements in Option B include the extension of the "Civic Street" pedestrian amenities along 8th Avenue from Pearl Street to Ferry Street, rehabilitation of the existing Park Blocks and the re-establishment of the historic Park Block at the northwest corner of 8th Avenue and Oak Street. However, this would require purchase of one-half of the present County parking lot site on the one-half block of Oak Street between 7th and 8th Avenues - the butterfly lot - and replacement of the lost County parking on another site. Total project cost for Option B, including these additional elements, is estimated at $41.7 million. Option B has the advantage of addressing a number of the policies adopted in the Downtown Plan, as well as supporting the principles developed as part of the Mayor's Civic Facilities Visioning Committee. Improvements to the current Park Blocks, re-establishment of the historic park block on the Northwest corner of 8th Avenue and Oak Street, and the improvement of 8th Avenue as the major Civic Street linking open spaces between the Park Blocks and Cannery Square, are all policies adopted in the Downtown Plan. In terms of the Civic Center Vision principles, Option B retains civic facilities along 8th Avenue, reinforces its character as a civic street, enhances open space, supports the development of partnerships by providing shared space, and provides parking for public safety vehicles and staff and potentially "frees up" dedicated parking under City Hall for public use. It also asks for a minimal amount of funding from the voters, and maximizes the use of internal resources to pay for the facility. The major difference between this option and Option C is that it does not include 20 year expansion space, nor does it increase the consolidation of Police functions, as the FEU/PCU units would remain at Garfield until a future addition to the Community Safety Building is constructed. Option C - Twenty-year Space Needs plus Civic Center Amenities Option C provides for Police space needs through 2028 with a 124,500 square foot building, consisting of 104,500 square feet to support Police functions, including FEU/PCU, plus 20,000 square feet to accommodate partnerships with social service agencies and additional public meet- ing room space. The estimated cost of the Community Safety Building in Option C is $43.1 mil- lion. Total project costs, including the same additional elements as Option B, are projected at $51.3 to $51.55 million, depending on the financing method. In addition to the Civic Center elements included in Option B, Option C allows for the consoli- dation of Police functions by re-integrating FEU and PCU into the Community Safety Building. This option also includes funding to relocate the Police Special Operations units to the Garfield facility for efficient operation. Option C expands public meeting room space, to further support partnerships and joint use of the facility with other public and non-profit agencies. There are two financing proposals for Option C - one would maximize the use of internal resources and the other L:\CMO\2004 Council Agendas\M040721\S040721A-atts.doc would maximize the amount of bond authority requested by voters. The option that maximizes the use of internal resources would be in accordance with the policy principles. These financing options are described more fully in Attachment E. Option D - Full Consolidation City Hall plus Community Safety Building Option D provides for Police space needs through 2028 with a 107,000 square foot building, consisting of 87,000 square feet to support Police functions (excluding FEU/PCU, which would remain at the Roosevelt site) plus 20,000 square feet to accommodate partnerships with social service agencies and additional public meeting room space. No improvements to the Park Block or 8th Avenue as the City's Civic Street are included in Option D, other than the block-long segment of 8th Avenue fronting City Hall and the Community Safety Building. The estimated cost of the Community Safety Building in Option D is $37.8 million. City Hall would be reconstructed or replaced under Option D with a 207,000 square foot building on the current City Hall site. City offices, including Public Works downtown functions, Planning and Development Department, and the Finance and ISD Divisions, would be consolidated into City Hall, and overall space needs would be met through 2020. Approximately 20,000 square feet of additional expansion space is included and it is assumed that the space would be leased out to another government partner, such as LCOG, for 10-15 years until it is needed by the City. The space needs of other agencies, such as EWEB or School District 4j, could also be accommodated if those agencies contributed additional resources to expand the building. During Construction, the City offices currently located in City Hall would need to temporarily move into other space. Municipal Court may be able to move to current federal court facility vacated when the new Federal Courthouse opens, or it would need to find other leased space suitable for court functions. CMO and HRRS could potentially move into other City-owned space in the interim, or might need to move into private leased space during construction. While the concept of a new City Hall is very preliminary at this point, the estimated cost based on general assumptions could reach $72.3 million. Total project costs for both the Community Safety Building and City Hall are projected at $111.5 million. Finance Costs In addition to the construction and soft costs for the building and amenities, the project budget must also include finance costs. In Options A through C1, there is $150,000 of estimated finance costs for an interfund loan. This will be needed because these options rely on Facility Reserve funds in future years beyond the end of construction. Options B, C and D include bond issuance costs and financial tracking costs. When the City issues bonds, it incurs costs to pay the underwriter, bond counsel, financial advisor, paying agent and Moody's Investors Service, as well as to prepare and distribute the bond documents. The financial tracking costs in Options B through D are for a part-time person to keep track of the various projects and funding sources included in the larger, more complex undertaking. L:\CMO\2004 Council Agendas\M040721\S040721A-atts.doc ATTACHMENT C Comparison of Civic Center Design Component Options to Policy Principles Policy Option A Option B Option C Option D 1. Consolidate civic functions a) Consolidate civic functions in and around ~'- ~'+ ~'+ ~'+ the future Civic Center to the greatest extent practical. b) Create an "urban campus" along 8th ~'- ~' ~' ~'+ Avenue to reflect the partnerships among public agencies and non-profit public service organizations, providing integrated services to the public and more efficient government operations. 2. Reinforce 8th Avenue as the Great Civic Street ~' ~' ~' ~' + a) Locate significant municipal, county, state, and federal buildings along 8a~ Avenue. ~'- ~' ~' ~'- b) Use consistent elements such as paving At Community At and sidewalk design, plantings, and street Safety Community lights to create a Civic promenade from Building only Safety Willamette Street to the Willamette Building + River. City Hall only 3. Enhance open space a) Create and enhance open space making ~'- ~'+ ~'+ ~' the Civic Center attractive for the general public and well as employees and customers. b) Enhancements to and expansion of the -- ~' ~' -- Park Blocks will support increased activity downtown. c) Open space along 8a~ Avenue will ~'- ~'+ ~'+ ~'- enhance its character as a great civic ½ block only 1 block street, only d) Cannery Square will draw pedestrians across Mill St. and provide a gateway to ........ the river. Policy Option A Option B Option C Option D 4. Develop partnerships a) Develop partnerships between public -- ~' ~' ~' agencies and non-governmental service providers to improve customer convenience, efficient service delivery, and commumcation between related agencies. b) Include non-profit agencies with -- ~' ~' ~' government functions to create more pedestrian traffic supporting small scale retail, entertainment, and other activities in the Civic Center area. 5. Include Public Safety services a) Public Safety services should be an ~' ~' ~' ~' integral part of the Civic Center - open and visible to the public, embodying community policing goals. b) Support Public Safety activities that ~' ~' ~' ~' increase visibility, access, and actual and perceived safety for individuals and property downtown. c) Location of social service agencies with -- ~' ~' ~' Public Safety services has a high potential for mutual benefit. 6. Provide adequate parking a) Coordinate the development of parking in ~'- ~'+ ~'+ ~'- the Civic Center to build on existing parking areas and locate new structured parking that is convenient and secure. b) Provide parking for the public, for safety ~' ~' ~' ~' vehicles, and for employees. 7. Employ cost-effective development approaches a) Utilize existing publicly-owned land and ~'+ ~' ~' (C1) ~'+ resources to the maximum extent. --(C2) b) Encourage public-private partnerships -- ~' ~' ~' that realize efficiencies through consolidation of services. c) Minimize the need for new public ~'+ ~'- -- ~'- revenues. d) Minimize life-cycle costs via appropriate ~'- earliest ~'- ~' ~'+ location, timing, and size of new or expansion renovated facilities. e) Use a 20 year horizon for space planning. -- ATTACHMENT D Proposed Financing Plan for the Civic Center Vision Financing Plan Options There are five options presented in this analysis, ranging from a base Community Safety Build- ing fully funded internally, to a combined City Hall and Community Safety Building option funded with internal resources plus General Obligation ("G.O.") Bonds. The option labels correspond to the building options presented above. Option A: The "Meeting Current Needs" option is paid for entirely with internal funding to come from current and future Facility Reserve resources and other one-time funds that are available or will most likely become available within the next year. Option B: The "Combining Near-Term Space Needs with Civic Center Amenities" option adds to the "Meeting Current Needs" option with expansion space to 2018, social service agency lease space, purchase of the butterfly lot, development of addi- tional park block space, redevelopment of lost parking, and "Civic Street" im- provements, and is funded with $29.1 million of internal resources and $12.6 million in General Obligation Bonds. Option C 1: The "Twenty-year Space Needs and Civic Center Amenities" option includes additional expansion space and more public meeting rooms, and is funded mainly with $29.2 million of internal resources plus $22.0 million of General Obligation Bonds. Option C2: A variation of the "Twenty-year Space Needs and Civic Center Amenities (pri- marily G.O. Bonds)" option is funded with $47.8 million of General Obligation Bonds plus $3.7 million of internal resources. Option D: "Full Consolidation City Hall plus Community Safety Building" is funded with $40.6 million of internal resources plus $70.8 million of G.O. Bonds. All of the options rely on significant amounts of one-time resources. According to the council- adopted Financial Management Goals & Policies, Policy C.6., the City will use non-recurring revenues (i.e., one-time revenues) on limited-duration services, capital projects, equipment requirements, or services that can be terminated without significant disruption to the community or City organization. The one-time resources included in the financing plan are used for a high- priority capital projects such as the Civic Center vision under this policy. Some of those one-time resources are subject to legal action before becoming available for this project, however. The use of the deferred revenue from the Telecommunications Tax lawsuits and from right-of-way payments in the General Fund carries some risk. Those funds are still the subject of legal action and may need to be returned to the companies that paid the taxes. There is a good likelihood that those funds will become available, however. If the lawsuits are ultimately resolved unfavorably from the City's standpoint, staff will need to return to Council with a back- up plan for funding the project. In the interim, design can begin, but the City will not sign a con- struction contract until the funds are free to be used for this purpose. Staff recommends going forward with Option B. Because the Option A building plan is likely to be able to be paid entirely from City funds without bond funds, the City can proceed with this facility at a minimum. If the council and the voters are interested in improving the project by building a facility with more amenities and that meets more of the policy goals, then they can participate by approving G.O. Bonds. The following chart summarizes the proposed financing plan for each of the options. Community Safety Building Financing Plan Options Option A Option B Option C1 Option C2 Option D General Obligation Bonds -- $12,620,000 $22,050,000 $47,775,000 $70,820,000 Limited Tax Bonds ........ 10,000,000 Facility Reserve $11,223,000 11,395,000 11,394,000 2,109,000 11,394,000 Telecommunications Funds 1X$ from Settlements 10,200,000 10,200,000 10,200,000 0 10,200,000 On-Going Telecom Funds 763,000 788,000 856,000 856,000 1,281,000 ROW Revenues in General Fund 5,200,000 5,200,000 5,200,000 0 5,200,000 Sale of Assets ........ 2,000,000 Urban Renewal Agency Funds 0 750,000 750,000 750,000 -- Interest Earnings on Cash Balances 750,000 750,000 750,000 0 500,000 Other Miscellaneous Sources 50,000 50,000 50,000 0 75,000 Totals $28,186,000 $41,753,000 $51,250,000 $51,490,000 $111,470,000 The specific items suggested for inclusion in the financing plan are described below. General Obligation Bonds: Based on the City's adopted financial management goals and poli- cies, voter-approved G.O. bonds would be an appropriate funding source for the projects. The policies state that G.O. bonds are to be used for major capital construction or improvements in support of general municipal services. G.O. bonds must be approved by voters, and approval is subject to the double-majority provi- sions of Measure 50. G.O. bonds are repaid with a property tax levy that is outside of Measure 5's tax rate limits. The uses ofG. O. bonds are limited to construction expenses and may not be used for certain other kinds of expenses, such as freestanding equipment, temporary relocation, or moving costs. The next election that is not subject to the double-majority is in November 2004. The City could ask voters for approval to issue G.O. Bonds to fund a portion of the Civic Center Vision in order to develop facilities that have more community amenities than what the City could afford solely with internal funds. The tax rate impact from the G.O. Bond options is shown in the following chart. Each option shows the impact of G.O. Bonds repaid over 20 years. The tax rate in the first year would be the highest and would go down over time, so both the first year and 20-year average impacts are shown. The cost to the average tax payer assumes an average home with an assessed value of $154,100 in FY04 (per the Lane County Assessor). G.O. Bond 20 Year Amount First Year Impact Average Impact Tax Rate Average Cost Tax Rate Average Cost Option B $12,620,000 $0.16 $26 $0.09 $18 Option C1 $22,050,000 $0.28 $45 $0.15 $31 Option C2 $47,775,000 $0.60 $97 $0.33 $68 Option D $70,820,000 $0.88 $144 $0.49 $101 The issuance of bonds in Option D would be timed to correspond to when the funds are needed for the construction. A first issue of approximately the amount needed to fund the Community Safety Building plus some of the design costs for the City Hall, would be sold relatively soon after the bond election. A second issue of the remaineder of G.O. Bonds would occur after the first bond issue funds are exhausted. A third issue of limited tax bonds (described below) would be sold towards the end of the project, most likely in FY09, to fund the remaining project costs. City of Eugene Limited Tax Bonds: It is assumed that the City will issue approximately $10 million in limited tax bonds under Option D in FY09. These bonds do not require voter approval and they are secured by the City's promise to pay the debt service from all available funds. The annual debt service on the bonds is estimated to be about $950,000 for 10 years and then $885,000 for the remaining 10 years, depending on interest rates at the time of the bond sale. These annual payments will be made the annual capitalization charge on downtown City office space that is currently directed to the Facility Reserve plus net lease payments made by LCOG or another government for 10 years on 20,000 square feet of expansion space. Facility Reserve Balance: The City has been setting aside funds for replacement of City Hall for several years. As a result, the FY05 budget includes a balance in the Facility Reserve of a little over $7.5 million. It is anticipated that approximately $3.9 million of additional funds will be added to the reserve during FY06 through FY09 from capital replacement charges and repay- ment of the Risk loan. Therefore, approximately $11.4 million could be available for funding of the Community Safety Building from this source. It is recommended that the furnishings, fix- tures and equipment, temporary relocation costs, and moving costs be funded from this source, since G.O. bond proceeds cannot be used for those items. The remainder of the Facility Reserve balance could be used for general construction costs. In Option C2, where all of the Facility Reserve is not used for this project, the balance of about $9 million would be saved as a contribution towards implementing the remainder of the Civic Center vision in a future project. For Options A through C1, Facility Reserve amounts are relied on beyond the end of the construction date. This will mean that the City will have to enter into interfund loan agreements in order to pay the construction costs and repay the loans when future Facility Reserve amounts are available. Telecommunications Funds: In December 2003, the Oregon Supreme Court ruled in favor of the City affirming the City's right to collect the 2% telecommunications tax on non-local ex- change revenue. In April, the City received roughly $9 million representing Qwest's interpre- tation and calculation of payment of the tax and interest on revenues earned from July 1997 through December 2003. This payment represents the last of the large expected past period pay- ments/settlements of the telecommunications tax. After consulting with the City Attorney, accountants and auditors, and based on Qwest's assertion that their payment is contingent on the resolution of a separate legal challenge, recognition of this payment was also deferred until that case is decided by the 9th Circuit Court of Appeals. Regardless of the Court's decision, the City Attorney believes, however, that these funds will ultimately be available to the City. A decision from the 9th Circuit is expected in the relatively near future. The City is also expecting about $800,000 from Qwest during FY05. The total of these two amounts, $10.2 million, is included in some of the financing plan options as a subsidy for the Civic Center Vision. While past council direction has devoted funding from the telecommunications tax to telecom- munications projects of community benefit, the settlement payments provide a unique oppor- tunity to fund a large portion of the Civic Center vision. This large one-time resource is also appropriately used for a high-priority capital project under the City's financial policies. The figures shown in the financing options A through C 1 and D represent the deferred revenue amounts plus the amount needed for telecommunications projects within the building. Option C2 includes only the amount needed for telecommunications equipment and retains $10.2 million for other uses. Right-of-Way Revenues in the General Fund: The City has been the subject of legal challenges to the imposition of right-of-way revenues in the General Fund. In addition, the City has been performing audits on some of the payers of the right-of-way fees. The largest of these revenues is related to the Qwest lawsuit. Qwest appealed the US District judge ruling favoring the City and the 9th Circuit Court heard arguments in November 2003. Staff anticipates a ruling some time in early FY05. Consistent with the City's practice of deferring recognition of contested revenues, the City has deferred recognition of these revenues while awaiting the decision of the court and potential additional appeals. There is some risk to relying on this resource for the financing plan, however. Should the court or any future appeal be decided against the City, this resource would not be available for this project and the City would have to develop an alternate financing plan. Urban RenewalAgency Funds: The City Council is currently considering amending the urban renewal plan for the Downtown District in order to use tax increment funds for any project other than the library. If those amendments are approved, the URA could contribute $750,000 toward the purchase and demolition of the butterfly parking structure from the County for redevelop- ment into additional park blocks space. Tax increment funds from the Riverfront District would be considered as a funding source for an additional parking structure across High Street from the Community Safety Building, to be developed at a later date. Diagrams of the Downtown and Riverfront Urban Renewal Districts are attached as Exhibit A. Asset Sales: In the case of full consolidation of City Hall, 858 Pearl Street and the Atrium would be available for sale. If a non-City owned site is chosen for any facility, the existing City Hall and/or the parking lot across the street might be available for sale. It should be pointed out, however, that asset sales typically take several years to accomplish, and they frequently do not generate the level of proceeds that have been estimated; therefore, it is difficult to guarantee this funding source for projects unless the sale has occurred and proceeds are already in the City's coffers. If the asset sale proceeds fall short, another funding source may need to be used to sup- plement the financing plan. Interest Earnings on City Cash Balances: As cash sits in City coffers until it is needed for design or construction cost, interest will accrue. For bond-funded projects, interest earnings are not included as a funding source for a project, but for City cash funded projects, it is appropriate to include a conservative amount for estimated interest earnings. Other Miscellaneous Funds: A number of other miscellaneous funding sources could be applied to this project. For instance, it might be possible to sell energy tax credits, to receive EWEB energy rebates, or to receive grants from other levels of government for the project. A small placeholder is shown in the financing plan for these kinds of items. Impact on Debt Burden and Debt Policies It is also essential to examine the impact of the bonding proposals on the City's debt burden. The chart below sets out the impact of each of the proposals against the City's debt policy limit of 1.0% of debt to real market value, assuming that the debt is issued immediately. As can be seen, all of the proposals would result in a debt burden that is within the policy limits. It should be noted, however, that Option D results in a net direct debt burden of 0.98% in the year the G.O. Bonds are issued, which would mean that there is insufficient room under the policy limit to issue any other debt until some of the existing debt is retired. Net Direct Net Direct Debt to Real Debt Debt to Real Debt Market GO Bonds Limited Tax Outstanding in Market Value Outstanding in Value in Issued Bonds Issued FY05 in FY05 FY10 FY10 Option B $12.6 million -- $57.5 million 0.49% $40.4 million 0.27% Option C1 $22.1 million -- $66.8 million 0.57% $47.4 million 0.32% Option C2 $47.8 million -- $92.7 million 0.79% $66.8 million 0.45% Option D $70.8 million $10.0 million $115.7 million 0.98% $93.5 million 0.63% Operating and Maintenance Costs Although not part of the plan for financing the capital costs, it is important to include the esti- mated operating and maintenance costs for the new building. The preliminary estimate of the ongoing O&M costs for a new Community Safety Building would equal $1.1 million to $1.7 million, depending on the size. The City Hall is estimated to require about $3.0 million in annual O&M costs. For Option D, with both new facilities, the combined annual O&M cost would be almost $4 million. About half of the O&M cost represents daily building custodial, energy and other out of pocket costs for operating the building. The other half represents the longer-term preservation of the building, which includes preventive maintenance funded by facility maintenance rates and build- ing preservation projects funded from the General Fund capital budget. In Options B or C, the social service agencies would pay lease costs equal to the O&M, so there would be partial funding for the added cost. In Option D, where there is full City Hall consoli- dation and redevelopment, there would be some existing lease and O&M payments that could be applied towards reducing the operations and maintenance costs for the new facilities. It is esti- mated that the City current contributes about one-half of the estimated O&M cost for the new facility on existing O&M, lease payments, major maintenance and capital costs for the locations that would be vacated when a new City Hall was opened. Given the City's structural budget imbalance, there is no obvious source of funding for a new on- going commitment of General Fund dollars of any net increase in O&M costs, however. If the council decides to authorize construction of this project, and assuming no change in the health of the General Fund, a future year budget process may have to reallocate existing General Fund dollars to the net increase in O&M on this facility. Exhibit A Central Eugene (Downtown) Urban Renewal Boundary 6th Avenue 6th Avenue 7th Avenue 7th Avenue 8thAvenue 8th Avenue Broadway loth Avenue ¢oth Avenue llth Avenue The Riverfront Urban Renewal District Plan ~×hibit A ii i I~ RJYerfro~t U~ba~ Renewal D~str[¢t , ~eet ~,/~y of£b~ene o 255 5zo z, oeo ~,53o Nar~h lO, 2004 ATTACHMENT E Summary of Financial Goals and Policies to Guide Funding of the Civic Center Vision The Budget Committee has adopted a set of policies to ensure the financial integrity of the or- ganization and to ensure that the service delivery system addresses the needs and intentions of Eugene's citizens. Prudent management of Eugene's financial resources allows for the continued ability to provide municipal services, both operating services and infrastructure maintenance and enhancement. There are five financial management goals adopted by the Budget Committee, the majority of which are relevant to the discussion of a Civic Center financing plan: 1. to establish and sustain a community supported service system; 2. to have a capital improvement program that adequately maintains and enhances the public's assets over their useful lives; 3. to provide cost effective services to citizens; 4. to provide financial and other service information to enable citizens to assess the costs and results of City services; and 5. to follow prudent and professional financial management practices to assure residents of Eugene and the financial community that our City government is well managed and in sound financial condition. The City's Financial Management Goals and Policies provide policy direction on the develop- ment of funding plans for large capital assets, such as those included in the Civic Center vision. A summary of how these policies would guide development of a funding plan for major infra- structure projects is set out below. Priority and Adequate Funding for Fixed Assets Several of the policies address the prioritization and adequate funding of the City's fixed assets (A.4, A. 5, B.8, D. 1, D.6). In their entirety, these policies state that adequate funding of the City's fixed assets is a very high priority for the organization, second only to preservation of the public safety system. Recognizing that the replacement of fixed assets is usually very costly, the policies also address the need to develop a plan for and to actively fund the replacement of those assets over a multi-year period. Development of a Civic Center financing plan that is adequately funded should be a high priority according to the City's financial policies. Use of Resources for Specific Purposes The policies discuss the appropriate use of specific revenues (B.9, C.4, C.6). In the General Fund, the City would not normally earmark specific revenues for specific purposes. For capital projects, however, the City may secure a dedicated revenue source to fund the projects. Non- recurring revenues are used for limited-duration services, capital projects, equipment require- ments or services that can be terminated without significant disruption to the community. A plan for funding the Civic Center vision should include dedicated revenue sources and should take advantage of non-recurring revenues whenever possible. Cost Recovery for City Services The City's numerous funds are created in order to separately track and evaluate various services and operations, as well as to meet legal and professional accounting standards (B.2). Some of those funds are related to fee-supported services. These services have cost-recovery policies established by the City Council (C.2). The policies consider the relative public/private benefits received from the services being provided. The policies also ensure that rates are set to be equitable and competitive, and that they will cover the percentage of the total cost deemed appropriate. The City's revised its practice around recovering the cost of downtown office space so that the various fee-supported services housed in privately-leased facilities contribute the same level towards facility use and replacement as services housed in a City-owned facility. The capitalize- tion charge is paid by all general office space uses located in the downtown area. The funds generated by the capitalization charge are placed in the Facility Reserve and dedicated towards replacement of City Hall and other downtown office space. Use of Bonding Capacity The appropriate use of the City's bonding capacity is addressed in the policies (D.3, D.7). General Obligation bonds are to be used for major capital construction or improvements in support of general municipal services. The General Fund may be pledged as a primary or secondary source of repayment of long-term debt obligations when it is in the best interests of the City, within prudent limits. A plan for funding the Civic Center vision should include the possibility of using General Obligation bonds if appropriate, because general municipal services (such as police, municipal court, City Council, etc.) are located within those offices. In addition, the plan should also consider the use of General Fund debt, up to prudent limits established by the Budget Committee.