Without turning to the public for support, the cost of a new public safety building would jump to $81 million, not including interest payments over 30 years, the new Palo Alto Finance Committee learned Tuesday night.
Construction inflation has pushed the cost of the building -- to be located at 2785 Park Boulevard -- to $69 million by the time construction could begin by April 2009, according to a city staff report.
But with debt financing, the cost jumps to $81.2 million, Deputy Administrative Services Director Joe Saccio wrote in a report.
The city would also have to pay about $5 million in interest annually for 30 years, resulting in some service cuts, City Manager Frank Benest told the committee Tuesday.
The city is considering financing the public safety building using "certificates of participation" (COP) after a preliminary poll showed the needed two-thirds of voters are unlikely to approve a bond to pay for the new 50,000-square-foot building.
COPs are a financing technique that would funnel city money through a city-managed non-profit organization, which would offer certificates to investors.
The police facility, currently located behind the Civic Center, is considered too small and outdated, it doesn't meet standards for evidence collection and storage and it would be vulnerable during an earthquake -- as would the emergency dispatch center and an emergency operations center in the City Hall basement, where city computers also are located.
Rather than financing the entire public-safety building with COPs, the four-member committee expressed interest in paying for the public safety, as well as a new Mitchell Park Library and Community Center, with a combination of bond money and COPs.
The two projects should remain wedded, Councilman Greg Schmid said, expressing an opinion echoed by other committee members.
"I would like to find a way both projects get rewarded and one project doesn't get guaranteed funding at the risk of the other," Committee Chair Jack Morton said.
If the city split the cost of both projects with residents, perhaps both would pass, sparing the city from the commitment to costly interest payments, which could be risky, Councilman Yiaway Yeh said.
Burt said his preference would also be to draw on some bond funding, but he remains pessimistic the community would support a public safety bond.
"My inclination is to try to find the revenue for COPs to try to get the job done," Councilman Pat Burt said.
"I'm torn between what I wish were the case and what I think is the case. Going to voters for the police building is going to be problematic."
Burt said he had heard that some community members thought using COPs was a strategy to circumvent the public. Actually, it is option that directly results from a minority of residents expressing disapproval of a bond, Burt said.
City staff members provided a list of potential sources for the interest payments, which could range from $4 to $5.2 million per year, depending on financing options and the contribution of "one-time" money initially.
Shaving the city's budget reserve could free up $3.6 million immediately, City Manager Frank Benest said. Other money could come from a business license tax, renting the current Police Department space, an expansion and move of Anderson Honda, the recently passed hotel tax increase and the Stanford Shopping Center expansion, among other options, the report states.
Money could also be drawn from the potential lease or sale of the city's 8-acre portion of the Cubberley Community Center site to Foothill College for a proposed education center, Benest said.
According to the staff's estimates, nearly $3 million of the interest payments could come from the expansion of the Stanford Shopping Center and construction of a new hotel.
But that troubled several committee members, who asked for future lists to exclude money dependent on the shopping center's expansion.
"That puts us in a situation of conflict," Schmid said, adding that he would have trouble negotiating over a development if the city was already dependent on its revenues.
For upcoming discussions, the committee asked staff to break out money that would come from the shopping center's expansion.
And the uncertainty of some of the sources, such as the business tax or Anderson Honda's expansion. also troubled several council members.
Benest also said $1 million could come from cuts in city services.
The payments could strain the city, committee members acknowledged.
"I have major anxieties that we are basically imposing upon ourselves a $5 million drain," Morton said. "That's the entire library budget we're talking about."
Committee members asked for a list of programs and services that could also use the $5 million.
Burt suggested setting a cap on the cost of the building. Public Works Director Glenn Roberts said the city molded the project around the basic needs of the department, rather than planning for extras.
"A price cap, if it's set too low, will defeat the whole purpose of the facility," Roberts said.
Roberts also said that construction inflation remains troubling and adds about $600,000 to the cost of the project each month.
Instead of passing the issue on to the full City Council, the committee voted unanimously to discuss financing the public safety building again at its Feb. 5 meeting.