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It looks as if Atherton should have enough private and public funds to build a new civic center without having to borrow.
That’s what the City Council heard at an April 5 study session held to examine the 2017-18 fiscal year budget and look at ways the town could borrow money if necessary to build the complex.
The budget shows the town continuing to bring in more revenues than it expects to spend. Before the council commits to spend more public money on the center, however, it wants to hear from voters.
An advisory measure on a June 6 ballot asks residents to overrule a 2012 vote limiting public money spent on a new town center.
The June measure asks the town’s voters to say whether they support the town spending the surplus that it already has, or expects to have in the next two years, on the project. The measure says the funding couldn’t come from the town’s reserves, from adding any new taxes specific to the project, or from changing the current parcel tax.
Information presented to the council shows the estimated $25.6 million cost of designing and constructing the new civic center could be covered by using more than $8.1 million in unallocated general funds, $4.4 million in unallocated capital improvement funds, and two years of educational revenue augmentation fund rebates (ERAF) of about $1 million a year.
The new civic center would have a police station; administrative, building and planning offices; and a new council chamber/emergency operations center. A new library, which will include the renovated historic council chambers building, is separately funded from the rest of the civic center with tax funds that can only be spent on the library.
The funding plan assumes that the town will have an additional $1.25 million surplus in the general fund at the end of the 2018-19 fiscal year that could also go to the town center construction. The figures also include $7 million in private donations through the fundraising group Atherton Now and close to $3 million in revenues from town building funds, which are allowed to be used under the 2012 measure.
The calculations show the town should have $221,000 more than what is currently estimated to be the cost of the project. The cost could change after it goes out to bid later this year.
Consultants from Urban Futures told the council that there are two options for raising the relatively small amount of money it is likely to need: a private placement loan from a bank or certificates of participation, which work like bonds but don’t require voter approval to issue.
Borrowing $5 million for 10 years in the form of certificates of participation would cost the town about $800,000 in interest and fees, Michael Busch of Urban Futures said. Borrowing the same amount from a bank would cost about $1.1 million, he said.
Councilman Rick DeGolia said the town doesn’t anticipate needing to borrow money. “I want to be very clear that we do not have that plan. It’s a possibility,” he said. “I’m absolutely confident that we have the funds” for construction, he said, and more money would be needed only if some unanticipated costs came up during construction.
“At this point, I don’t see the need,” he said.
Citing his experience remodeling a home, Councilman Bill Widmer said the town might need “to have a cushion so we’re not scrambling at the last minute” for funding.
“Our town’s in really good financial position at this point,” said Councilwoman Elizabeth Lewis. “But if there’s no other funding source, if we need it,” then knowing what options are available is important.
Mayor Mike Lempres agreed. “What I think we’re doing is kind of going through a prudent planning process,” he said.
A member of the town’s finance committee who was in the audience, Jim Massey, warned the town to be careful about borrowing.
“I urge the council to be very cautious with these financial instruments,” he said, citing other cases in which communities have gotten into financial hot water by taking on debt that doesn’t require taxpayer approval.
But committee member Bob Polito had another take. He warned that the town has other liabilities looming, especially workers’ compensation and retirement contributions. In addition, the town’s parcel tax, which brings in about $1.86 million a year, expires in 2018.
With interest rates low, “money’s awfully cheap,” he said. “What happens if the parcel tax isn’t renewed?” he asked. “I think it would be very prudent to take out some cheap money, and if all goes well we can pay it back very quickly.”
Resident Arthur (Jack) Ringham, a longtime resident and member of the town’s rail committee, also favored borrowing money. “If you take out a loan, you pay for it over time, you’re paying it back with cheaper dollars,” he said. “We still need money for street repairs and flooding problems.”
Didi Fisher, a former Atherton council member who has been working with Atherton Now to raise money for the civic center, said she hopes enough donations will come in “so the town doesn’t have to take on any debt.”
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