On March 25, Homer voters
consider a ballot proposition to authorize the city to purchase bonds to
pay for the proposed new Homer City Hall, Town Plaza and Town Square.
The bond does not include a tax increase.
As voters consider the proposition, they will ask two big questions:
What will the project cost and how will the city pay for it? The longer
term question on the mind of some critics and even of some supporters
is if the city can support the bond debt not just in the near future,
but as Homer's economy changes and grows.
"We feel the city right now has the money to make the bond payments,"
said Homer City Manager Walt Wrede.
The city proposes to build on city and Cook Inlet Region Inc. land in
Homer's Town Center a 20,000-square-foot City Hall, with office space
for up to 40 employees twice the current number and a
3,000-square-foot meeting hall and council chambers; a Town Plaza at the
east end of City Hall, and a Town Square, a 1-acre area to the west and
north on CIRI land that includes a "garden for all ages," an overlook
and paths that would be built later or as the budget allows.
Also part of the project is a road to be extended from Hazel Avenue east
to Main Street accessing the new city hall, along with water, sewer,
electric lines and other utilities.
ECI/Hyer Architects, Jay Brant General Contractors, Agnew::Beck and
Corvus Design have been awarded a contract to design and build the
project.
Under the general-contractor, construction-manager concept, architects
work with a general contractor to develop a design that's not only
architecturally distinct, but affordable and practical.
What the project will cost
According to a discussion paper prepared by Wrede for the Homer City
Council, the latest and best estimate by the design and construction
team is that the project will cost $11.8 million. The team presents
35-percent design plans Monday to the council with a more precise
figure. That cost excludes infrastructure and land acquisition.
The new City Hall will be on city land in the northeast area of Town
Center. The associated Town Square is on a CIRI owned lot just west of
new City Hall and next to Kachemak Heritage Land Trust property. CIRI
also owns land south of the proposed Hazel Avenue extension the area
where Fred Meyer had proposed to build a store before canceling its
plans.
CIRI is in discussions with the city about the cost of purchasing the
Town Square lot, said Sandra Moller, CIRI director of business
development and construction.
Wrede estimated the infrastructure cost to be between $1.2 and $1.6
million. Because the project would impact traffic at the Main Street and
Sterling Highway intersection, some sort of mitigation likely would be
required, either a stoplight or roundabout. That cost has not been
determined. The state of Alaska has made improving Homer intersections
part of its transportation improvement project program. The section of
Main Street between Pioneer Avenue and the Sterling Highway is a state
road; the city has asked the state to improve Main Street as it did with
Bartlett Street, with the city then taking over maintenance.
Total cost:
City Hall and Town Plaza: $11.8 million
Hazel Avenue extension and utilities: $1.2-1.6 million
Land acquisition: Unknown
Traffic mitigation: Unknown
Total known cost: $13-13.4 million
Available funding
Funding has been secured for part of the Town Square project. The
Kachemak Bay Campus, Kenai Peninsula College-University of Alaska
Anchorage, plans to expand into the old city hall and has secured state
funding. Part of the incentive for the city to build a new city hall is
to allow KBC to grow from its building next door on Pioneer Avenue.
Wrede estimated the city would sell the old city hall to UAA for $1.3
million.
Last year, the Alaska Legislature made a $2 million grant to the city
for a new city hall and plaza. In anticipation of building, the city
also had been putting money into a depreciation account. Last year, the
city council transfered $415,000 from that account into a City Hall
construction account.
Money for the Hazel Avenue extension and infrastructure would come from
two other city accounts, the Homer Accelerated Water and Sewer Program,
or HAWSP, and the Homer Accelerated Roads and Trails Program, or HART.
HAWSP receives .75 percent of city sales tax revenues, about $1.4
million a year, with a fund balance of $1.18 million.
The HART fund receives about $1.4 million a year, with a fund balance at
the end of this fiscal year estimated at $3.6 million.
Money also could be borrowed from other loan programs to pay for road
or sewer and water improvements, with the debt paid for using dedicated
revenues from the HART or HAWSP funds.
As a neighboring landowner with about two-thirds of the frontage along
the proposed Hazel Avenue extensions, CIRI would pay a proportionate
share of extending the infrastructure. Moller said CIRI and the city are
looking at several options for the city purchasing the CIRI lot for the
Town Square: an outright purchase, a land exchange or the city paying
all or part of the CIRI infrastructure extension cost. If CIRI was asked
to pay for infrastructure costs as would any property owner sharing in
a road or utility extension it would have to vote on approving that
project. If CIRI didn't approve the extension, the city would either
have to pay for the infrastructure itself, or use an alternate route to
the new city hall, perhaps from Pioneer Avenue.
Moller said CIRI has not made a decision on the road extension as
proposed by the design team.
"We're not ready to say we agree or disagree," she said. "We need to
look at it in terms of the big picture we might have on that parcel."
Identified funding:
Legislative grant: $2 million
Old city hall sale: $1.3 million (estimated)
City Hall Construction account: $415,000
Subtotal: $3.715 million
Budget shortfall ($11.8 million minus $3.715 million): $8.085 million
Infrastructure funding, HART and HAWSP: up to $4.78 million available
CIRI contribution to infrastructure: Unknown, but under discussion
The increase in city debt
if the bond proposition passes
The question on the ballot is if the city should authorize borrowing
bonds for up to $8 million for construction of the new city hall, town
plaza and town square. Again, there is not a corresponding question
asking voters to approve a tax increase, since the city does not need to
raise taxes to pay for the bond debt. That $8 million could be reduced
if the city gets other grants or if the project is downsized, Wrede
said.
If voters approve purchasing bonds to fund the project, the city
estimates it would get a 25-year term bond at 4.5 percent interest, for
an annual payment of $540,000 a year. The bond debt would be a line item
in the city budget. That would be what's called a General Obligation
Bond, where no specific source of revenue to pay off the bond has been
identified. The city does not have any General Obligation Bond debt,
Wrede said.
The city does have other debts, most of them paid for by enterprise
funds or dedicated revenue funds. The city's debt service is $7.8
million, or 3.4 percent of its $23 million budget. Of the $7.8 million
debt, 25 percent or $1.9 million is attributable to the city's General
Fund debt, most of that for the new Homer Public Library. If the Town
Square bond authorization passes, that bond payment would be shouldered
by the General Fund account. The library debt is for a loan not a bond
from the U.S. Department of Agriculture at 4.13 percent.
The $8 million question is: Can the city continue paying $540,000 a year
for the Town Square project without raising taxes or cutting programs?
"If we assume that revenue projections for future years are
conservative, that the economy will continue to grow and that the
council and city staff will continue to exercise fiscal prudence and
constraint, there is sufficient reason to believe that the recent trend
of year-end surpluses will continue to some degree," Wrede wrote the
council.
Past city surpluses for the last three years came from the city's fiscal
conservatism, Wrede said.
"We held the line on expenses, we came in under budget," he said. "Our
revenues exceeded our projections The council saved the money."
That doesn't mean future projections will hold as in recent years.
Tourism could go down, with sales taxes decreasing. Property values and
assessments could drop. That's a concern Homer City Council Member Mike
Heimbuch has.
"The idea that we can pay for this without raising taxes is a snapshot
in time," he said. "We are counting on revenue growth with some of the
fundamental indicators about the health of the economy not supporting
that," he added.
Heimbuch said indicators like declining school enrollment, stagnant
salaries and poor job prospects for young people might not paint as rosy
a picture. One reason why sales taxes have gone up is because consumer
costs have gone up, he pointed out. Property taxes have increased
because of higher assessments, a value partly driven by Outside
speculation, Heimbuch said.
"Property values reflect how people are doing in other places," Heimbuch
said. "That's why it's so dangerous. It doesn't reflect how people here
are doing."
Those concerns aside, Heimbuch said he's supporting the bond
proposition.
"There are some practical limitations, and yet we don't want to impede
our dreams," he said.
Those dreams might result in an economic boost. Backers of the
proposition have argued Town Square would bring more visitors to
downtown and revitalize an area that already has seen some improvement
such as new construction and remodeling on Pioneer Avenue and in Old
Town.
"(Town Square) will serve as a hub for commerce, social interaction and
civic engagement," Homer Chamber of Commerce director Tina Day said in
supporting it.
"The idea is it will be good for business. It will be good for economic
development," Wrede said. "That's what we want for this downtown core
we want a vibrant, downtown business core."
A copy of Wrede's memorandum to the city council, along with other
information on Town Square, is on the project's Web site a http://homertownsquare.com/.
Michael Armstrong can be reached at michael.armstrong@homernews.com.
