[RP TownTalk] Financial Good News/Bad News

[Jonathan Ebbeler]

All -
The $5+mil Town Hall expansion project that is certainly a cost a budget driver for our budget was projected to be financed through additional bond borrowing by the town as well as bond reimbursements from the state.  There was an also an anticipated revenue source of $150,0000 through the sale of the existing Boys and Girls Club to Park and Planning.

The town has received a series of bond allocations totaling $808,000 from Annapolis, thanks to the hard work of our state Delegation lobbying on our behalf.  They were as follows:

2011 State Capital Budget<http://mgaleg.maryland.gov/2011rs/bills/hb/hb0071e.pdf>  (click on link)
(page 52, 5(a)&(b) and page 54, 7(b))

2012 State Capital Budget<http://mgaleg.maryland.gov/2012rs/bills/sb/sb0151e.pdf>  (click on link)
(page 56-57, 5(a)&(b) and page 58, 7(b))

2013 State Consolidated Capital Bond Bill<http://mgaleg.maryland.gov/2013RS/bills/hb/hb0101E.pdf>  (click on link)
(page 64-65, 5(a)&(b) and page 65, 7)

General Assembly Year

$ Amount

Date to present matching funds

Date to spend $

2011

$275,000

June 1, 2013

December 1, 2014

2012

$283,000

June 1, 2014

December 1, 2015

2013

$250,000

June 1, 2015,

June 1, 2020


It was reported late one Worksession (there aren't minutes so I cannot verify the exact date but I believe in 2014) that we had timed out due to either not presenting the matching funds or not spending the money.  As they say with government appropriations, 'use it or lose it.'

In reading the 2016 Bond bill I did notice that the State Delegation was able to resurrect from the dead, $275,000 ($175k from the Senate $100k from the House) of the lost money by extending the original 2011 allocation expiration dates until 2018.

2016 State Consolidated Capital Bond Bill<http://mgaleg.maryland.gov/2016rs/chapters_noln/ch_27_sb0191e.pdf>  (click on link)
(page 84)

In reading the bond background the following justification was given for the extension:
Bond Background<http://mgaleg.maryland.gov/pubs/budgetfiscal/2016rs-riverdale-park-town-hall-expansion-priorauthorization-factsheet.pdf> (click on link)

"During the initial engineering phase, a soil study revealed weaknesses in both the soil and footers under the existing structure, significant enough to mandate that we raze the existing building and construct a new structure, instead of renovating the existing structure as planned. Accordingly, the project team had to alter architectural drawings and evaluate additional engineering requirements, which set back the schedule. We are now moving forward with the new engineering plan, and therefore request this extension.

To date the Town has expended $250,000 and has encumbered an additional $657,000 in project expenses. Initial reimbursement paperwork will be sent to the State by mid month."

The anticipated cost of the Town Hall has already increased from ~$1.5mil when the original 2011-13 Bond Bill paperwork to ~$5mil+ with a scope change of a re-use renovation to razing the building and starting over with a much larger structure.

There will be office rent expenditures throughout the multi-year re-build and whatever the anticipated budget get bid out at, it would be prudent to assume we haven't seen the final numbers yet (the structure is after all neighbors with the river).

It would seem prudent to me to seek the reimbursement that is now available to us and potentially shelf this project, if we are in financial straits dire enough that an Executive Order had to be issued.  The loss of $400k in the property taxes from the GSA purchase has been known for many months; as the assessable base reports indicate, as any of our previous year's budgets indicate, fluctuations in revenue happen and are typically offset, as they were this year and in future years by increases in the assessable base of all the other non-exempt properties.  The FY16-17 assessable reports represent that we had $150k decrease in taxes not $400k.

The GSA purchase alone is not the sole contributing factor to why an Executive Order was issued.  We have a structural deficit brought about by spending anticipating revenues before realizing them and policy choices.

Depending on the final interest rate and amortization period for the cost of the bridge over the RR tracks the town roughly forgives a ~$400k tax debt forgiveness each year.  The break-even point for that project (where the additional taxes of the project exceed the TIF bond payment) is roughly the completion of the first two phases of Office and Retail (178,172 sq ft).  Based on the current projected project schedule this looks likely to occur in FY18 at the earliest.  Any of the individual residential buildings will pay for the financing alone but the bridge is a trigger for much of that development.

I don't have anything against any of the projects, my prioritization is just different.  At this point there should be a sole focus on economic development rather than building up staff for a future need that has yet to be proven (i.e. what happens if the development stagnates).  In municipal budgets, new and expanded economic development is the gift that keeps on giving year after year, staff and benefit costs are the liabilities that have bankrupted many towns.

Budgets are all about policy choices which is why our Charter leaves it up to the full Council to determine expenditures (which was already done).  Better to have checks and balances in place vs. concentrating power - absolute power corrupts absolutely.

Best,

Jonathan

Councilman, Ward 1
Chair, Economic Development




-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://riverdale-park.org/pipermail/towntalk/attachments/20160427/6888f14a/attachment.html>