Funding public-safety building splits committee

City Council to discuss financing quandary at its meeting next Monday as it races against inflation

The four members of Palo Alto's Finance Committee agreed on only one issue Tuesday evening: The city needs a new public-safety building, and it needed it yesterday.

But just how to finance a building to house a new police headquarters and emergency-command center split the committee 2-2.

The city is racing against an estimated $500,000-a-month construction-cost inflation while it juggles financing alternatives for the building, which could cost between $69 million and $81 million depending on the funding method

The committee tossed the issue to the full City Council for consideration next Monday night.

Committee Chairman Jack Morton and Councilman Greg Schmid allied behind a proposal to combine a $110-million bond measure with $41 million of other city revenues to pay for both the public-safety building and library improvements.

The $80-million library plan includes a new Mitchell Park Library and Community Center, expansion and rehabilitation of Main Library and a makeover for the Downtown Library.

Morton said it is important to keep the two projects tightly affiliated.

Using different financing methods "just sets one building against the other," Morton said.

"It just seems to me that unless we can come up with a package that distributes the cost and the burden it's just not going to work," he said.

Morton's plan nearly gained the support of council members Pat Burt and Yiaway Yeh. They would have endorsed the $110/$41 million split if new polling shows the combined measure could pass. If the polls show community opposition, Burt said he wanted to guarantee the city would pursue the public-safety building project using "certificates of participation" (COPs).

COPs are a financing technique that would funnel city money through a city-managed non-profit organization, which would offer certificates to investors.

Yeh said he particularly wants to avoid any additional delay, which would reduce any savings gained by using bond money.

Burt was the committee's optimist, expressing confidence the city could amass the $5.2 million annually to pay for the public-safety building and even contribute to the library projects, in addition to all of the other demands on the city's resources.

But Schmid said he believes even the $5.2 million alone would require significant tightening, and possible cuts, to other city programs.

It costs more overall to use COPs, the alternative to bonds, which create a new source of revenue for the project rather than tapping into existing sources, Schmid pointed out.

The public-safety building would only cost $69 million if paid for with bonds, but with COPs the cost jumps to $81.2 million because of debt financing and other add-ons, the city staff reported.

The staff's plan to use COPs for the public-safety building depends on receiving $1.8 million annually to lease part of the Cubberley Community Center site to Foothill College, a new hotel at the Stanford Shopping Center, the center's expansion, retaining and expanding Anderson Honda, creating a business license tax and squeezing $1 million of savings from the city's budget each year, according to a staff report.

Without the Stanford Shopping Center expansion and other less-than-certain outcomes, "it is a tight scenario," City Manager Frank Benest said.

"It requires a (business) tax increase and very good discipline," he said.

The city should conduct new community polls to see if the joint proposal could pass, the committee agreed.

A February 2007 poll of 600 residents found that support for a then-$95 million two-project bond measure fell between 55 and 59 percent, well below the nearly 67 percent needed for issuance.

But this time, voters would be asked if their opinion changed if they knew the city committed other money to the projects.

A bond measure would be the best option in a perfect world, but voters don't view the issue from a community-wide perspective, Benest argued.

"Homeowners (say) I already pay the taxes, let them find a way to fund this building," Benest said. "They see it as writing an additional check and paying additional tax dollars over and above."

Schmid said it didn't take him long to see the benefits of a bond measure.

"And you're an economist on the City Council," Burt pointed out.

The 50,000-square-foot public-safety building is slated to be built at 2785 Park Boulevard, just south of Oregon Expressway. If financed using COPs, construction could begin in April 2009 and finish in April 2011, according to city estimates.

Several public-safety building supporters urged the committee to endorse COPs.

"The bottom line is we've got to move on and get this done," former mayor Vic Ojakian said.

Costs escalate at least $500,000 for each month of delay, according to city estimates.

The City Council is expected to discuss public-safety building financing at its Feb. 11 meeting.

(Staff Writer Becky Trout can be e-mailed at


Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 6, 2008 at 12:51 pm

It's all dollars and no sense to me.

Like this comment
Posted by Good Luck
a resident of Charleston Gardens
on Feb 6, 2008 at 1:21 pm

Good luck with that bond thing. Headed into a scary recessions, I would guess the chance of passing a mega-bond with both items is pretty low. Your bed's been made, City Council, by years and years of delay, inaction, and inattention - now you'll have to choose one project and show that you can get it done. Start making cuts today, that might convince voters you are serious about any kind of real discipline.

Like this comment
Posted by Periwinkle
a resident of Downtown North
on Feb 6, 2008 at 1:46 pm

COPs for the police building, with a taste of the COPs for the library, and finishing the library with a bond + some private donations. That'll get it done.

Like this comment
Posted by Resident
a resident of Crescent Park
on Feb 7, 2008 at 9:32 am

Just fix the main library. Make it competitive with surrounding communities. Leave the rest alone for now.

Let the police expand in the existing City Hall facility. Get rid of some of the waste right there in the City Hall facility to make room for the police.

Put the public safety personnel and equipment in an existing building that is safer in case of an earthquake. Stop the nonsense of a mega-structure with all the amenities for both the police and the public safety personnel. Let's demand some common sense be used here. Don't vote to privde any more money until the city starts controlling how it spends the money it already has. Also insist that the city thoughtfully and economically use the facilities it already has. We don't need yet another police station/public safety building.

Like this comment
Posted by Resident
a resident of South of Midtown
on Feb 9, 2008 at 12:47 pm

Resident: I quote: "Just fix the Mitchell Park Library. Make it competitive with surrounding communities. Leave the rest along for now." Why bother with Main Library?

Sorry, but further commenting on this topic has been closed.

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