If the price is right …
Published 10:01 am Wednesday, December 7, 2011
County could fund Government Center remodel without tax increase, but commissioners still want to trim price tag
Editor’s note: This is part of an ongoing series on the potential move of Health and Human Services downtown. Look to upcoming editions of the Herald for more.
After months of speculation on costs, the county board may be able to remodel vacant space in the Government Center to move in Health and Human Services without raising taxes or borrowing money.
“I think we’ll be able to finance this project internally,” Commissioner Ray Tucker said Friday.
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Since the completion of the $28-million Jail and Justice Center, the board has discussed moving Health and Human Services from Oak Park Mall — where it pays roughly $250,000 a year on utilities, rent taxes and other costs — to the vacant space in the Government Center.
“We’ve got currently available space sitting empty that we’re cooling and heating and maintaining,” Commissioner Tony Bennett said.
While moving to county-owned property appears to be the preferred option, it’s far from a done deal. Bennett and Commissioner Jerry Reinartz would like to shave the cost of the estimated $3.8 million Government Center remodel.
“We want to have it done as economically as possible, with no frills,” Bennett said.
If the board can fund the project internally, that would essentially eliminate the renovation’s burden on taxpayers.
“We won’t be looking at a tax increase or bond,” Tucker said.
Though the project has not been approved, the county board is currently in discussions with architects and looking at funding sources.
Internal funds would speed up the project, should the board decide to move ahead on the remodel, according to County Coordinator Craig Oscarson.
Reinartz, however, has asked if the internal funds could be used to reduce the county’s tax levy.
Where the money could come from
The Finance Committee e-mailed a memo to the board on Friday about paying for the estimated $3.8 million project using reserves and other internal funds. The option will be discussed at the weekly county board meeting, scheduled for 1 p.m. Thursday.
The county already has $1 million set aside from when it sold the prior Health and Human Services building to Hormel Foods Corp. for its south corporate offices.
The Finance Committee recommends the board fund the remaining $2.8 million using the capital projects fund, reserves and repayments on a loan to McNeilus Companies Inc.
The repayments stem from a county loan for the construction of the McNeilus plant in Dexter.
Tucker said the board could use about $1 million of the roughly $3.5 million in repayments on the Government Center project, while allowing the rest to be used for revenue or for other community projects similar to the McNeilus project.
•Capital projects fund
Additional revenue could come from county’s capital projects fund, which the 2010 audit estimated totals more than $4 million, according to Oscarson.
“That would take up almost all of what we call the funding gap for the remodeling project,” Oscarson said.
About $1.6 million of that is tied up in the Law Enforcement Center Remodel, which could run concurrently with the Government Center remodel.
The county could take the rest out of the county’s general fund undesignated reserves. The county currently has about $9.5 million in reserves, but a portion of that is designated for solid waste management use only.
Despite what many see as good news, commissioners aren’t ready to greenlight the project.
Just because the money appears to be available in reserves, doesn’t mean the remodel is the right way to use it. Reinartz said he is interested in using fund balances to curb the county’s levy increase, which could be as high as 7 percent.
“If we have a lot of money in reserves, we should actually consider our levy first,” he said.
Some counties and the state legislature have used fund balances to reduce the tax levy, but Oscarson argued that simply delays a tax increase.
“At some point in time, you pay the price,” Oscarson said. “At some point in the future, you have your regular tax increase and what I call a makeup tax increase.”
Using reserves for long-term projects is nothing new for the county, according to Oscarson. In the past, reserves have been used to build at the fairgrounds, to build bridges and more.
“If you got the money in the bank, why not use it,” Oscarson said.
Still, Bennett and Reinartz would like to trim the estimated price tag of the levy.
“I’d still like to bring down that dollar amount,” Bennett said. “We could do a more modest remodel.”
Eyes still downtown
Despite continued talks about how to fund the remodel and how much to spend, moving downtown seems to be the preferred option.
“I don’t think there’s any real interest in staying at the mall,” Bennett said.
While Reinartz said it isn’t out of the question to stay, he still supports moving to space the county owns.
“To me it’s just a common sense thing to get them back downtown in that space,” he said.
Bennett cited uncertainty at the mall — particularly unpaid property taxes — as one reason to move.
“It might be a gamble to stay there,” he said.
A number of questions still need to be answered before the board makes its decision.
Human Services is projecting a budget shortfall of about $500,000, which will come out of reserves. Even after that hit, Oscarson said the Finance Committee feels the reserves are healthy enough.
Finance Director Donna Welsh is continuing to look at budget projections to see if any unexpected costs could drive down fund balances.
Out of home placement costs have played a key part in increasing the Human Services’ budget. But next year, the board is proposing to add those costs to the levy because it appears the additional placement costs won’t go away.
While using internal funds could speed up the project, it could also save some money. The county would not have to spend time selling bonds, and it would also mean a cost savings of about $51,000 to pay for bond agents and a bonds attorney.
While the county would save money on the interest of paying the bonds, Oscarson noted the county would lose out on interest revenue earned on money in reserves.
If the board approves the internal funding and the project moves forward, Oscarson said construction could begin as soon as next fall. Reinartz noted the move would still be about two years down the road.
“We’re just hoping it’s something we can do, because it just makes more sense to have them down here,” Reinartz said.