As part of its coverage of the town square bond proposition, the Homer News presents a list of questions-and-answers about the project. This week's installment looks at funding.
Q: Where's the money coming from?
A: $3.715 million has been identified: $2 million in grants from the Alaska Legislature, $1.3 million estimated for sale of the old city hall to the University of Alaska Anchorage and $400,000 from the city hall Construction Account. The shortfall is $8.085 million; the bond authorization asks for the city to borrow up to $8 million. The city is searching for other funding, such as another Legislative grant, or grants from The Rasmuson or Murdock Foundations. Any other grants would reduce the bond borrowed. Rep. Paul Seaton, R-Homer, and Sen. Gary Stevens, R-Kodiak, have asked for another $2 million grant in this year's capital budget, but that has not yet been approved.
Q: How much additional debt is the city taking on?
A: The estimated annual debt load to the city for a 25-year bond at 4.5 percent is $540,000, although the interest rate could be higher. The city's 2008 debt service after the sale of the old library is 6 percent of its current budget of $23 million. If the bond authorization passes, the annual debt service Ñ including town square and the new water treatment plant Ñ would be 9 percent of the 2009 estimated budget. All of the current debt payments come from identified revenue sources, such as enterprise funds or dedicated tax revenues.
Q: How would the bond be purchased?
A: Homer and other Alaska cities finance bonds through the Alaska Municipal Bond Bank Authority, which has an A-1 rating from Moody's Financial Services and an A rating from Standard & Poor. Cities rely on the rating of the Municipal Bond Bank to purchase bonds. A sale this week of 20-, 25- and 30-year bond packages for projects in Dillingham, Seward, Kodiak and the Kodiak Island Borough went for a 4.79 percent rate, said Deven Mitchell, executive director of the Bond Bank.
Q: How does Homer's bond debt compare to other cities?
A: The bond question is for a general obligation bond, that is, a bond backed by the full faith and credit of the city. Except for the U.S. Department of Agriculture library loan Ñ technically not a bond Ñ all of the city's bonds are revenue bonds. The city currently has no outstanding general obligation bond rate. If it borrowed up to $8 million, the per capita bond debt ($8 million divided by 5,400 people) would be $1,481.
According to Mitchell, other per capita general obligation debts are $4,200 for Anchorage, $12,000 for the Aleutian Islands East Borough, $8,100 for the Haines Borough, $2,000 for Seward and $1,850 for Nome.
Q: Is the city's debt load declining?
A: Yes, according to city manager Walt Wrede. The Port and Harbor Debt would drop from $215,000 in 2008 to $9,517 in 2009. The Water Sewer fund has a $66,000 payment this year and drops to $22,000 for 2009. The General Fund debt for the library will go to $1.8 million with the sale of the old library.
Q: Is the cost for road access and water and sewer part of the bond authorization?
A: No. The infrastructure cost would be an additional debt paid for using revenues from the Homer Area Roads and Trails Program and the Homer Area Accelerated Water and Sewer Program. Money also could be borrowed under various loan programs to pay for the infrastructure, with the debt load paid for with revenues from HART and HAWSP. Those funds can only be used for roads and trails or water and sewer related purposes.
Q: Will CIRI and other landowners pay for infrastructure?
A: The city is in discussions with CIRI over what it would pay for the infrastructure and how the city would pay CIRI for the 1-acre town square lot. Options suggested have included a proportionate share of the infrastructure, city purchase of the CIRI lot, a land exchange for the CIRI lot or the city paying a portion of CIRI's infrastructure costs in return for land.
Q: What if CIRI or other property owners in the area don't agree to pay their share of infrastructure costs?
A: The Hazel Avenue extension is the only route passing by CIRI land. The city could access new city hall from access through its land off of Pioneer Avenue or from several routes off Main Street. The Main Street access might involve discussions with adjacent landowners.
Q: If the bond passes, will my property taxes go up?
A: Based on current sales tax, property tax and other revenue projections and budgets, the city has said it will not raise property or sales taxes to pay for the new city hall debt. If revenues go down or if costs increase, as with any budget, the city would have to meet its budget by cutting programs and services or raising taxes Ñ or some combination of those two options.
Q: Will saying "yes" hurt funding for other important projects?
A: The most immediate project is the Water Treatment Plant. Bids were received recently. That project is to be paid for out of clean water loan programs at an interest rate of 1.5 percent. The only other immediate project is expanding the Harbor Office.
Projects like a new Public Safety building or Fire Hall are part of long-range capital-improvement project proposals. Completed projects on the CIP list, like the new Homer Public Library, had been proposed for 15-20 years before being built.
Q: What will the yearly maintenance costs on the building be and how do those compare with maintenance costs of the existing building?
A: The maintenance costs aren't known yet. Custodial costs would go up because of the larger building.
Q: Is the new building energy efficient?
A: Yes. The new city hall will be energy efficient, with superinsulated panels. Designers are looking into renewable energy, such as solar heating or ground-source heat pumps. The old city hall is energy inefficient with relatively poor insulation. One estimate is that energy costs would be 25 percent more for the new building even though it's over twice the size of the old building.
Q: What about sustainability?
A: The project will be built using some of the recommendations of the city's Climate Action Plan, including increasing density downtown, making the city more walkable, adding more shared parking and making it easier for people to get out of cars and walk around.
Q: What about environmental costs?
A: Alternative and renewable energies will reduce the building's carbon footprint. Designers are looking at technologies, like ground-source heat pumps, which use the heat of the earth to help warm the building.
Previous construction disrupted the area's wetlands. The town square project proposes to restore the natural waterflow, with a recreated stream running through the site and down to wetlands below Alaska Islands and Ocean Visitor Center.
Q: Will the new meeting hall or other space be rented?
A: Yes. The city currently rents the Cowles Council Chambers and other space for private meetings.
Q: What happens if the measure is defeated?
A: The city has several options:
• Stop the project;
• Solicit a private contractor to build new city hall and lease it back to the city under a lease-buy plan;
• Slow down and try to raise more money, and return to the voters with another proposal;
• Scale back the project and build in phases;
• Use available funding to complete the design and use that design to raise more money.
Voter disapproval could make applying for grants challenging because grant funders look at community support in weighing applications.
Q: What happens to the college plans if the bond question fails?
A: The university doesn't know.
Q: What happens to the state grants to the city and college if the projects don't go forward?
A: Legislative grant money doesn't go away if the grants aren't spent. By Alaska Statute, the grant is there until the city or college uses it, said Katie Shows, a legislative aide to Seaton. Practically speaking, the Office of Finance asks grantees to update the office on its use of grants every five years.
If the college wanted to use its grant for purchase of old city hall for some other purpose, that would require legislative approval. Seaton said a vote in favor of the bond authorization would be seen by the Legislature as an expression of community support for the project.
"That's what the state wants to see most of, that the individual communities value a project," Shows said.
Q: What are the alternatives to a new town square city hall? Can the city expand the old Homer Intermediate School or use other space?
A: The city can't expand old city hall because of parking restraints under city zoning codes. The city looked at remodeling the old school, but to double the space to 20,000-square-feet and bring it up to codes would have cost $8 million, Wrede said. Architects and engineers recommended starting from scratch.
Q: Does the development of town center depend on passing this measure?
A: No. CIRI, Kachemak Heritage Land Trust and the city have all thought of town center as being a "three legged stool," with a civic anchor, commercial development and open space as components of developing town center. If CIRI found a tenant or project for its property, that also could spur development. Passing the bond authorization and building town square does put infrastructure and one leg of the stool in place to help other projects happen, town square supporters have argued.
Q: Will saying "yes" help or hurt nearby businesses?
A: According to a 2003 analysis prepared by economist Steve Colt of the Institute for Social and Economic Research, the town square project "would generate substantial economic and fiscal benefits."
The study predicts commercial taxable sales in the area would become 50 percent higher over five years, yielding an additional $1.2 million in sales tax revenues to Homer and $680,000 in Kenai Peninsula Borough sales tax revenues.
-- Compiled by Michael Armstrong, with information from the city of Homer, Jay-Brant Construction, Kachemak Bay Campus, Rep. Seaton's office and the Alaska Municipal Bond Bank Authority.
