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Uploaded: Monday, December 15, 2008, 11:04 PM
Bleak bond market 'needn't slow PA library work'
Staff outlines plan to borrow from city's General Fund for final design work and repay when municipal bond market improves
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by Gennady Sheyner
Palo Alto Online Staff
Today's bleak municipal bond market, hit hard by the national economic crisis, doesn't have to slow down the rebuilding of Palo Alto's libraries under the $76 million library bond approved by voters Nov. 4, according to a plan proposed by city staff.
The only immediate funds needed are about $4 million for design work on library rebuilding and $400,000 for other required contracts over the next two months, according to a new staff report.
The staff is recommending borrowing that amount from the city's General Fund and repaying it in the spring of 2010, when the city would need to sell bonds so construction can begin after the final design work and approvals are completed. The plan was presented to the City Council as a non-action informational report Monday night (Dec. 15).
The plan would mean the current downturn in the municipal bond market would not likely affect the library project – unless the bleak conditions persist into 2010, according to Lalo Perez, director of administrative services.
"We're at least a year away from issuing bonds, so the current market conditions are not much of a concern," Perez said. "We can only hope things will get better."
The plan to borrow from then reimburse the General Fund was suggested by staff before Measure N was passed on Nov. 4. While Measure N gave the city the green light to issue $76 million in bonds it created no timeline requirements.
So the city can wait until the need for money is particularly urgent or until interest rates on municipal bonds become favorable before issuing any bonds.
The new report advises the council to do just that.
"It would be inefficient and more costly to issue general obligation bonds at this time and more optimal to wait until the first phase of construction begins," the report states.
Meanwhile, the city could proceed with design plans. Officials expect to approve design contracts for Mitchell Park and Downtown libraries in the next two months, launching the design phase. Construction contracts would then be awarded in spring of 2010.
Under the proposed plan, the Mitchell Park Library and separate Community Center would be combined in a new building and expanded to include a children's area, space for teenagers, a program room and group-study rooms. The plan calls for a new 15,000-square-foot community room, which would replace the current Community Center building and which would be attached to the library.
The Downtown Library would be refurbished and receive seismic and fire-safety upgrades.
City officials said they expect to begin designing renovations on the Main Library in late 2010. These would include new group-study rooms, lighting upgrades and a new "program space" that would seat 100 people.
(Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.)
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Posted by Kate, a resident of the Duveneck/St. Francis neighborhood, on Dec 16, 2008 at 7:22 am Do we have to pay property taxes while this thing simmers and the bonds can be sold?
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Posted by yep, a resident of the Crescent Park neighborhood, on Dec 16, 2008 at 8:35 am Of course.
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Posted by Marvin, a resident of the Charleston Gardens neighborhood, on Dec 16, 2008 at 8:42 am What interest rate will be charged for the loan from the General Fund?
Is the staff suggestion of borrowing from the general fund legal? What impact will taking $4 million from the general fund have on other city needs (I realize that the library should be our number one priority--after all, we must maintain 5 branches and build a new community center).
Seems to me we voted for the bonds and no money should be spent until the bonds can be sold and the money raised. Or will our council and staff come up with some creative booking keeping to keep the library crowd happy?
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Posted by Too Much Money, Wrong Time, a resident of the Duveneck/St. Francis neighborhood, on Dec 16, 2008 at 10:24 am I am a Library supporter, but I did not support prop N. It was too much money to borrow and spend in the current economic times we are faced with. Now using money out of the general fund is ok to start the project? Kiss the $4 million goodbye and say hello to your new parcel tax!
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Posted by Disgusted parent, a resident of Another Palo Alto neighborhood, on Dec 16, 2008 at 1:21 pm Well, this really stinks - that the library supporters are so hell bent on the library, that they are apparently going to be completely blind to the harsh economic realities that are facing the tax payers at this time, have no sense of impending ecnoomic difficulties that are approaching (for everyone), and they are bound and determined to barrel ahead no matter how damaging this might be to city and homeonwers financially.
They are going to borrow from the city before they know if they can afford to borrow ultimately as a bond? First of all, that is not what Measure N said they'd do. Second, they may or may not be able to borrow a year from now, depending on the economy. Then what? What suffers then? Shouldn't they wait until they know the cost of the borrowing, interest rate, (etc), and know they can secure the funds?
[Portion removed by Palo Alto Online staff.]
Third, The measure N Ordinance wording says that the tax levy will start upon sale of the first bond, expressly for principal and interest repayment of the BOND. So that sounds like they can only tax the citizens for Principal and Interest repayment OF THE BOND, UPON FIRST SALE of the bond. (not upon borrowing from the city or anywhere else.) Sounds like citizens of Palo Alto need a citizens rights/tax attorney. ASAP.
They really gotta have the library that bad? Its not like people's houses are burning down or flooding or our water supplies are tainted.
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Posted by looking forward, a resident of the Crescent Park neighborhood, on Dec 16, 2008 at 1:57 pm Dear Disgusted,
The measure passed with 70% approval. It wasn't even close. This is what people voted for, what they want. They voted for it to be started now not in 5 years time. The economic climate was well understood at the time this bond passed. There is no new news here.
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Posted by Marvin, a resident of the Charleston Gardens neighborhood, on Dec 16, 2008 at 3:02 pm Looking Forward--you are correct the measure passed with 70% approval (actually 69.3%), however the wording of the bond measure needs to be read carefully. The measure was for a bond--which means the money is raised by selling bonds--if the bonds cannot be sold there should be no money available for the time being.
While the smooth talking pro-N people like Klein, Beecham, cormack et al may have made it sound that the money would be available immediately, that is not the case.
While it may sound easy to just borrow the money from the general fund for now, $4+ million i snot small potatoes--we need to see what will have to be cut [portion removed by Palo Alto Online staff.]
We definitely need to have some lawyers look over the wording of the bond and see if this maneuver is legal and within the letter of the measure that 69.3% of the people voted for.
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Posted by Resident, a resident of Another Palo Alto neighborhood, on Dec 16, 2008 at 3:24 pm This sounds like a different version of the same story, PA process. I was under the impression all the design had been done and the work would actually start asap, that's what I had been told by library supporters. It sounds to me that my kids will be in college before the library is done.
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Posted by Anonymous, a resident of the Downtown North neighborhood, on Dec 16, 2008 at 3:33 pm Hello -
The article is saying that given the current economic conditions it may not be possible to finance the project through the bond market. Who do you suggest we sell the bonds to in order to raise the monies for this project?
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Posted by rc, a resident of the College Terrace neighborhood, on Dec 16, 2008 at 4:01 pm This story is misleading. If you read the city manager's report, and compare that to what the staff has said before, it appears the actual start of construction has changed from 2010 to 2011 -- a one year delay. This talk about borrowing money from the General Fund is kind of a smokescreen since those funds seem to be earmarked for pre-construction work.
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Posted by Me Too, a resident of the Midtown neighborhood, on Dec 16, 2008 at 5:24 pm Measure N specifically approved issuing the bonds only:
"... shall the City of Palo Alto issue bonds up to $76,000,000 to construct a new energy-efficient Mitchell Park Library and Community Center, expand and renovate Main Library, and renovate Downtown Library, with annual audits and independent citizen oversight?"
That said, the Council is likely within their authority to approve monies for library projects, which may (or may not) be eligible to be repaid when the bond is issued later.
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Posted by chrisk, a resident of the University South neighborhood, on Dec 16, 2008 at 6:47 pm Dear Looking Forward,
Why did you vote for it if you weren't interested in a project that would happen 5 years from now?
On November 4, hadn't you been hearing about the turmoil in the credit markets? You can't expect the supporters of the issue to hit you over the head with this. You have to read the newspapers and watch the news on TV.
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Posted by Resident, a resident of Another Palo Alto neighborhood, on Dec 17, 2008 at 8:51 am A total of 31,566 people voted on Proposition N, 21,894 in favor (69.36%)and 9,672 (30.64%)against. A 2/3 majority of the vote was needed for the measure to pass - 21,044 of the total of votes cast. Palo Alto population was 58,246 in July 2007 according to the City of Palo Alto web site.
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Posted by anonymous, a resident of the Downtown North neighborhood, on Dec 17, 2008 at 9:04 am Resident,
Your point would be what? The point to the article is that the ECONOMY (BOND MARKET) will impact this. We have absolutely no control of that!
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Posted by Resident (one already commenting on this thread but not the last poster), a resident of Another Palo Alto neighborhood, on Dec 17, 2008 at 9:11 am Fellow resident.
I am grateful for the breakdown in numbers you have quoted. It appears that approximately 30,000 of nearly 60,000 residents voted on this. This turnout sounds quite low, but the nearly 60,000 residents included presumably children and non-citizens without the ability to vote.
However, regardless of the number of votes, this has passed, but given the slim number of votes above the 2/3 needed to pass, this was not the slam dunk many proponents seem to think. There are many, many residents who are not happy that this passed, and there are more who have since felt that they were duped or voted without doing enough research before voting.
For this reason, we are all going to be paying for a long time for this library remodel whether we like it or not, whether we voted for it or not. Some of us are going to be paying a lot more than others and I believe that this is going to be very difficult for a great many residents. The least the City can do is to use this money in a responsible way and not spend indiscriminately. It should also get on with the work in a timely fashion or we will still be hearing of library closures in hot weather and other complaints for many years to come.
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Posted by looking forward, a resident of the Crescent Park neighborhood, on Dec 17, 2008 at 9:28 am Chrissk,
I didn't vote for the bond! That doesn't mean I can't recognize the overwhelming support for it. As to when it was to begin, $1.5million had already been spent on the designs and the work on DT was to start immediately.
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Posted by Build It And They Will Come, a resident of the Barron Park neighborhood, on Dec 18, 2008 at 1:18 am "this was not the slam dunk many proponents seem to think."
69%+ is a landslide in polling parlance. The Library is going to be built, and it's going to enhance our city. I can't wait until opening day some years hence.
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Posted by No thanks, a resident of the Barron Park neighborhood, on Dec 18, 2008 at 4:24 pm Build it and they will come: You believe in the motto of the developers
and look at the mess they have gotten us into - overcrowded schools, overcrowded traffic, overcrowded libraries, overcrowded hospitals, and you think that is a good thing? You must be making money off of the new people. The rest of us don't see what's so good about it.
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