The proposed new City Hall/Town Plaza project will cost several million dollars more than previously estimated, but can still be built without raising taxes, said Homer city officials Monday.
The council on Monday approved a preliminary project budget of $11,799,000 for constructing and equipping the new building and Town Plaza and adopted an ordinance that put an $8 million bond question on the March 25 special election.
The budget amount is still tentative, as designers have yet to reach the 35 percent design phase, but City Manager Walt Wrede said the "team is pretty confident in this number."
Previous estimates for the project's overall cost ranged in the $8 million to $10 million range but those estimates didn't take into account an estimated $450,000 for furnishings and equipment and nearly $700,000 for contingencies.
The nearly $11.8 million figure does not address land acquisition or infrastructure. The proposed location of the new town square/plaza is on land owned by Cook Inlet Region Inc. and the city will need to acquire that property. The city and CIRI are currently negotiating that deal which will be made public prior to the special election.
There also will be some infrastructure costs that would come from the dedicated Homer Accelerated Roads and Trails Program and the Homer Accelerated Water and Sewer Program. The HART fund is projected to end the year with a balance of more than $3.5 million while the HAWSP fund will have a balance of more than $1.8 million.
The $8 million bond question approved Monday is $2 million more than the city originally planned to ask voters for, but can still be paid for without raising taxes, said Wrede.
When it comes to questions about the project "'Where is the money coming from?' is probably the most common," said Wrede. "And I think there is a real good story to tell."
The general fund is healthy and the city has been running a budget surplus for the past three years, Wrede said.
By the end of the year, the city is projected to have a total debt of $7,828,568 with less than $2 million of that debt attributable to the General Fund, according to a discussion paper given to the council Monday by Wrede.
Almost all of the General Fund debt is a low interest (4.13 percent) loan for the new library. And the council on Monday approved the sale of the old library building to Jim and Lori Heston of Homer for $462,500 and stated an intention to use that money to pay down the debt on the new library.
Still, according to the discussion paper, an $8 million bond sale, with a 25-year term at 4.5 percent would result in net principal and interest payments of $540,000 per year.
Wrede said the intention of the city would be to try and pay for this bond within the budget process each year. But if that becomes difficult or impossible, there are several ways to pay for it, including using projected budget surpluses or dipping into the general fund itself.
"I think we can say with confidence that the general fund is good enough to be able to make bond payments without raising taxes," Wrede said.
The General Fund Reserve Account is projected to contain more than $4 million at the close of the fiscal year and has more than $600,000 in a Special Projects Account and more than $900,000 in depreciation and fleet reserve accounts.
This somewhat rosy view of city finances is based on some assumptions, however, that were outlined in the discussion paper.
"The assumptions are that the economy and revenues from taxes will continue to grow (or at least not decrease,) and that the City will refrain from assuming responsibility for major or expensive new programs or services; at least in the next few years," the paper reads.
Proponents of the projects spoke out Monday in support of the council action, calling it the civic anchor of a plan long in the works and a potentially viable economic engine for the town.
Increasing construction costs will only make the needed project more expensive down the road, said resident Steve Gibson.
The more than $3.7 million in secured funding for the project and the subsequent college expansion is reason enough to move forward, some said Monday.
Others, however, weren't convinced.
"Just because the price of Cadillac Escalades are going up next year, doesn't mean every man, woman and child should go out and buy one," said resident Frank Griswold.
The next public open house and workshop for the project is scheduled for Feb. 21 at City Hall. More information can be found on the Web at www.homertownsquare.com.
In other news, the council:
* Appointed Caroline Storm to the Advisory Planning Commission, appointed Stephen Scarpitta to the Economic Development Advisory Commission and reappointed Kevin Hogan and Catherine Ulmer to the Port and Harbor Advisory Commission;
* Transferred $15,000 from the City Hall Recycling Fund to the Sustainability Fund; and
* Approved a memorandum of agreement between the City of Homer and the Kachemak Nordic Ski Club to operate and maintain trails on city-owned land in the Diamond Creek Watershed.
Ben Stuart can be reached at ben.stuart@homernews.com.
