Title
RESOLUTION AUTHORIZING THE MAKING OF CERTAIN IMPROVEMENTS TO THE SEDGWICK COUNTY COURTHOUSE COMPLEX AND PROVIDING FOR THE PAYMENT OF THE COSTS THEREOF.
Presented by: Chris Chronis, Chief Financial Officer.
RECOMMENDED ACTION: Adopt the resolution and authorize the Chairman to sign the agreement.
Body
During the summer of this year, the Board of County Commissioners accepted a staff recommendation that the County enter into an agreement to purchase an office building commonly known as the 'IRS Building' located at the corner of 3rd Street North and Water Street, subject to certain conditions. The staff recommendation was driven by a need to obtain sufficient suitable office space to house the Metropolitan Area Building and Construction Department (MABCD), which at present in housed in two locations separated by several miles, and to relocate the Main Tag Office of the County Treasurer, which at present is housed in inappropriate space at the corner of Murdock Street and Water Street. Each of those needs had been the subject of bond-funded capital improvement projects in the adopted CIP, but the availability of the IRS building offered an alternative to satisfy both needs and provide county-owned space for other operations presently housed in leased space, all after taking into account the eliminated lease payments of the other operations, at less cost to the taxpayers than had been contemplated in the two approved CIP projects.
The building contains 92,372 square feet, and the plan is to allocate the space as follows:
Agency Square feet Share of total Share of occupied space
MABCD 21,030 23% 27%
MAPD 17,205 19% 22%
Appraiser 21,961 24% 28%
Environmental resources 3,405 4% 4%
Sheriff professional standards unit 845 1% 1%
Tag office 14,000 15% 18%
Subtotal - occupied space 78,446 85% 100%
Unallocated space 171 0%
Common areas 13,755 15%
Total usable space 92,372 100%
The project is estimated to cost no more than $15,755,000, consisting of the following cost elements:
|
Estimated cost |
Acquisition |
$ 4,900,000 |
Construction |
7,816,896 |
Architect |
505,352 |
Furnishings |
1,797,695 |
Other |
103,367 |
Contingency |
631,690 |
Total project cost |
$ 15,755,000 |
The project is to be funded with proceeds generated by the sale of General Obligation bonds in the last half of 2015, after precise project costs have been determined. Timing the bond sale this way, as is the County's typical practice, allows the County to reduce the size of the debt if costs are less than these estimates. It also eliminates the risk that final project costs will deviate from the preliminary estimates and the corresponding risk that the County will have sold too much debt (thus incurring unnecessary interest costs) or too little debt (thus requiring the County to reallocate other funding sources to pay the increased project costs).
The IRS tax code allows tax-exempt bond proceeds to be used to reimburse project costs incurred prior to the bond sale, but requires that the issuer of the bonds first adopt a resolution declaring it's intent to do so prior to the date of any such payments. The resolution declares that the project is a necessary public project, authorizes county staff to complete the project, and declares the intent of the county to finance it with the proceeds of a future bond issue.
Alternatives:
1. The Board of County Commissioners could abort the project and require that MABCD, the Treasurer's Main Tag Office, and the other county operations affected by the project remain in their present offices.
2. The Board of County Commissioners could abort this project and revert to the original plan of undertaking two CIP projects, one to house the Main Tag Office and the other to house MABCD.
3. The Board of County Commissioners could decline to fund the project with a bond issue and identify some other funding source instead.
Financial Considerations:
The transaction costs associated with the bond issue are estimated to total $285,000 for bond counsel, financial advisory fees, credit ratings, registration fees, and such. These transaction costs will be funded with bond proceeds, so the total maximum amount of bonds to be sold is expected to be $16,040,000. The estimated yearly principal and interest cost to repay the debt is $1.3 million for the first 10 years, decreasing to $780,000 for the second 10 years. A summary of these estimates and the proposed sources of yearly debt service follows:
GO bond transaction summary: |
|
Direct project costs |
$15,755,000 |
Transaction costs |
285,000 |
Total bond issue |
$16,040,000 |
|
|
Maximum maturity |
20 years |
Average coupon rate |
3.14% |
True interest cost |
3.23% |
|
|
Bond repayment summary: |
|
Principal repayment |
$16,040,000 |
Interest payment |
4,849,368 |
Total debt service |
$20,889,368 |
|
|
Share of principal repayment in 5 years |
30% |
Average annual debt service years 1 - 5 |
$ 1,353,800 |
Source of annual debt service: |
|
MABCD fees |
$ 362,930 |
Reallocation of current lease payments |
$ 221,400 |
Elimination of Tag Office debt service |
$ 202,350 |
County property tax |
$ 567,120 |
|
|
Share of principal repayment in 10 years |
60% |
Average annual debt service years 6 - 10 |
$ 1,268,500 |
Source of annual debt service: |
|
MABCD fees |
$ 340,063 |
Reallocation of current lease payments |
$ 221,400 |
Elimination of Tag Office debt service |
$ 202,350 |
County property tax |
$ 504,687 |
|
|
Share of principal repayment in 20 years |
100% |
Average annual debt service years 11 - 20 |
$ 777,770 |
Source of annual debt service: |
|
MABCD fees |
$ 208,507 |
Reallocation of current lease payments |
$ 221,400 |
Elimination of Tag Office debt service |
$ 202,350 |
County property tax |
$ 145,513 |
Legal Considerations:
K.S.A. ยง19-1510, as amended by Charter Resolution No. 56, authorizes the Board of County Commissioners to erect, construct, reconstruct or improve a courthouse and to construct additions and improvements to it, and to issue general obligation bonds for the purpose of paying the costs of such projects. For these purposes, 'courthouse' means the existing County courthouse and other County administrative offices, court facilities, and parking located within three city blocks of the existing courthouse.
Policy Considerations:
These bonds count against the County's statutory debt limitations. The statutory limit is 3% of the county tax base, which was $145,185,000 as of the end of last year. Including these bonds, the county will have approximately $48,000,000 of outstanding debt applicable to the statutory limit at the end of 2015.
The County's adopted Debt Policy provides five ratios that constitute limits on the total County debt that may be outstanding at any point. The issuance of these Bonds will not cause those ceilings to be exceeded. As is shown in the following table, all current and planned 2015 debt including this issue falls within the debt limits established by County policy.
Ratio |
Policy maximum |
Estimated actual 12/31/2015 |
Per capita direct debt |
$600 |
$356 |
Direct debt as % of full market value |
1.50% |
0.56% |
Per capita direct, overlapping & underlying debt |
$3,000 |
$3,483 |
Direct, overlapping & underlying debt as % of full market value 6.00% |
5.50% |
|
Annual debt service as % of budgeted expenditures |
20% |
9.79% |
Outside Attendees: N/A
Multimedia Presentation: N/A