Bonding the Whole Thing?

November 22, 2014 at 11:09 am 16 comments


By Andrew Richter

Paying for new public buildings is never fun but in Crystal it has become a circus. Let me give you a quick history;

Crystal is in need of a new public works facility. The old building is falling apart. I can testify to this since I toured the building a few years back. Crystal, though, is a fully developed community which limits where a new building can go. Without going through all the details, Crystal decided to make the old Knights of Columbus building their new site. To do this, they had to buy the land and use eminent domain to acquire several businesses. One parcel of land is still in litigation.

At the time (around November 2013) the council had decided to use cash to pay for the project. Crystal has a building replacement fund and that has over $10,300,000 in it. Mayor Adams went on Mayor’s Minutes and reaffirmed the council’s decision. Since then, though, the council seems to have changed their minds about the financing.

The total bill for the project is as follows according to city documents I’ve uncovered;

Site Acquisition and Clearance $3,000,000

Construction Costs $8,8,00,000

Consulting and Furnishing $1,700,000 (believe it or not)

The council can still pay cash for the project by taking money from other funds to finance this, but now (at least with the current council until January) that doesn’t look likely.

The council seems to have three options before them

1) Pay all cash

This can be done by using the $10.3 million building replacement fund combined with funds from other areas. The Highway 81 levy (about $563,000 a year) could then be used to replenish the building replacement fund.

2) All bonding

An all bonding option would be the most expensive option. According to city documents the bonding payments will not begin until February 2017 and they won’t end until 2036! Over the life of the bond, the city will repay the principal of $13,500,000 and on top of that they will pay an extra $5,844,727.50 in interest for a grand total of $19,344,727.50! So , in other words, bonding the whole project will stick Crystal citizens with almost $6 million in debt!

3) Some combination of the two

The council has discussed bonding $4 million and paying cash for the rest. This vote requires a super majority or five of seven members. This option will cost about $1,000,0000 in interest payments.

From listening to work sessions it seems as though Laura Libby and John Budziszewski want to bond the whole thing. I can’t make a shred of sense on Libby’s reasoning. I’ve been trying all morning but I just don’t know how to summarize it. Budziezewski also wants to bond for reasons that make little if any sense. At the August 27 work session Budziezewski said that he didn’t want to discuss financing until he was “assured” that the Highway 81 wouldn’t used for anything except being returned to taxpayers. Quite frankly, this position really ticks me off. As I’ve explained before, this guy isn’t the protector of this money and has done nothing for it until his re-election bid. So we’re going to spend almost $6,000,000 of taxpayer money to save $563,000!! Make a lot of sense Johnny B! Budziezewski said near the end of the meeting that “he didn’t are if the entire project was scrapped.” Wow, what a guy! You vote to spend $3,000,000 acquiring the property and use eminent domain and then you want to scrap the project!

The rest of the council seems to have shifted their positions too. Mark Hoffman and Joe Selton originally wanted to pay cash for the project but they almost immediately started to back pedal. Even Casey Peak and Julie Deshler seem to have wavered a bit on the “all-cash” option. Only Mayor Jim Adams has steadfastly said he doesn’t want to bond.

I think city staff is also responsible for this “walk back” on the all-cash option. After the council agreed to pay cash for the project, staff began to voice their concerns about other things. All of a sudden the police department needed a new expansion ten years before they originally said. All of a sudden the community center “might need some work.” And all of a sudden the almost never used Becker Park Pavilion “may need a new roof.” Staff is clearly pushing the council to do some bonding and I think these scare tactics have influenced some council members.

My concern continues to be the “all bonding” option and I would like to delay action on this. My worry is that the bitter outgoing councilmen are going to push the “all-bonding” option just to stick to the next council. At the November 13 work session Julie Deshler tried to push a decision off until January since the council is so divided. Mark Hoffman, though, was hearing none of it. No, no, he doesn’t want the next council to have a crack at this. Hoffman also insinuated that if the vote to bond $4,000,000 fails, he will vote for the all-bonding option. And whatever Hoffman does, Joe Selton will follow suit since they’re joined at the hip.

A public hearing is scheduled for December 2 and supposedly a vote is going to take place on December 16 (as always the public hearing is last). Considering the awful conduct by four members of the council at the November 6 meeting, we really need to worry about what could happen here. Will the three outgoing council people and Laura Libby force a vote on December 2? Are they going force the all-bonding option sticking Crystal citizens and the next council with $6,000,000 in debt?

I’m not going to prognosticate on what will happen but I suggest that Crystal citizens get to the December 2 meeting and voice their concerns. Whether they are listened to or not is up in the air.

 

 

 

 

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Entry filed under: City Government, Community, Crystal. Tags: , , , , , , , , , .

What Does It Mean To Be A Public Servant? -Part 2 Am I Reading This Right?

16 Comments Add your own

  • 1. Kathleen Webb  |  November 22, 2014 at 6:48 pm

    I’m curious to know where the 4 or 5 homes were located that you state were acquired by eminent domain and what people were forced out of their homes for the public works project.

    I could be wrong, but it was my understanding the lots purchased were the old KC hall which sold for an agreed upon price, a lawyer’s office which sold for an agreed upon price, some land from the cemetery which sold for an agreed upon price, and a vacant piece of land which may have been acquired by eminent domain, I’m not sure. But I live very close to there and I’m not aware of any houses being purchased at all, by eminent domain or otherwise. There weren’t even any houses in that area.

    Reply
  • 2. communitysolutionsmn  |  November 22, 2014 at 11:12 pm

    They got several properties…..read these meeting minutes
    http://www.crystalmn.gov/2014_02_03_Council_Meeting_Minutes.pdf
    I’ll look for more

    Reply
    • 3. Tom Karnowski  |  November 24, 2014 at 3:32 pm

      The addresses listed in the Crystal City council minutes link above, do not seem to involve any family residences. 5025 West Broadway is listed as vacant commercial land (http://216.23.166.91/property/mn/minneapolis/55429/5025-w-broadway-ave/31911209 ) 5027 West Broadway is/was a business establishment (housing law offices). May we learn where exactly where Community Solutions found the Crystal council “use(d) eminent domain to acquire four or five homes”, an action you said “force(d) people out of their homes”?

      Reply
      • 4. Casey Peak  |  November 25, 2014 at 1:18 am

        There were no residences acquired via eminent domain. That was the reason we moved it to the new location. We would have had to acquire several residences via eminent domain. One lady is very old and intends to live out the rest of her years there. It would have been a bad option to remain at the current location. It also would have cost about the same amount due to it being below the flood plain in some parts. This was the best option for the future of our city and had the least current negative impact. The site should be good for us for the foreseeable future.

  • 5. Tom Karnowski  |  November 25, 2014 at 1:13 pm

    Thank you for the helpful information, Casey. This exchange wouldn’t have been necessary had the Community Solutions blog provided factual information to begin with, as opposed to representing errant opinion as truth…even though the article above has now been revised to exclude the author’s original inaccuracies.

    Reply
  • 6. wants2know  |  November 25, 2014 at 2:15 pm

    Can we get back to the original subject of this post? Why, when there are funds set aside in an account for just this type of project are four seasoned Council Members want 100% bonding. They would rather put taxpayers in debt for years and increase the cost of the project!

    These same folks claim to be very familiar with the city’s budgeting process and to be very concerned about spending. The city is already struggling to meet expenses and pay for previous bonding.

    No matter how low interest rates are, it is not fiscally smart to burden property owners with long term debt in addition to the increased cost of repayment. This is both childish and petty just like the behavior at City Council meetings lately.

    Reply
    • 7. ReNae Bowman  |  November 29, 2014 at 9:24 am

      The city is not struggling to meet expenses and pay for previous bonding. Once again, you alter the truth to lend credence to your incredible story telling. You do American and democracy a great disservice.

      Reply
  • 8. Tom Karnowski  |  November 25, 2014 at 4:24 pm

    Respectfully looking past the incidental inaccuracies regarding eminent domain in your blog’s earlier incarnation and focusing on its original subject, I must admit confusion. In the closing remarks of your 11/22 “Bonding The Whole Thing?” post, you conclude: “My worry is that the bitter outgoing councilmen are going to push the ‘all-cash’ option just to stick to the next council”. But in today’s response, you fear these same members “want 100% bonding”. Which projected funding vote for these council members are you condemning…promoting (pushing) the ‘all cash’ option, or wanting 100% bonding? Is this apparent disparity of thought the product of poor word choice, or something more subtle that I might have missed?

    Reply
    • 9. wants2know  |  November 25, 2014 at 4:58 pm

      To whom are you referring? I don’t see a new post from Mr. Richter. Don’t you think you should check your facts before posting?

      Reply
  • 10. Tom Karnowski  |  November 25, 2014 at 6:21 pm

    My error!
    I failed to notice that (the anonymous?) “wants2know” is the author of the posting above that began with “Can we get back…” and not Mr. Richter, as I had mistakenly assumed.
    Apologies!
    Still, my basic question about Andy’s original blog posting remains.
    As I pointed out, Mr. Richter writes, “My worry is that the bitter outgoing councilmen are going to push the ‘all-cash’ option just to stick to the next council.”
    And later, he asks: “Will the three outgoing council people and Laura Libby force a vote on December 2? Are they going force the all-bonding option…?”
    So my puzzlement continues:
    Which projected funding vote for these council members is Mr. Richter condemning…having them promote (push) the “all cash” option, or having these members force the “all-bonding option”?

    Reply
  • 11. wants2know  |  November 25, 2014 at 7:17 pm

    There is always the option to postpone any vote until January. This would seem to be the fairest way to deal with the issue. Let the incoming Council make the hard choice and face the consequences.

    Reply
  • 12. communitysolutionsmn  |  November 25, 2014 at 7:17 pm

    Tom I apologize for the confusion. I meant “all bonding”: not all cash. When I’m writing these things it always sounds good when I read it and sometimes I don’t catch everything.

    I’ll take responsibility for the inaccuracy of the previous post. I accepted wrong information. They were businesses not homes and either one or two parcels of land are currently still in litigation based on who you believe so I won’t go there.

    The original point is that bonding the entire thing is absurd and I can;t understand the thinking.

    Reply
    • 13. Tom Karnowski  |  November 25, 2014 at 8:26 pm

      Thanks for the clarification of your blog point, Andy. Your opinion makes more sense now. My view? One can only hope the council has done/is doing an extensive cost-benefit analysis regarding the selection of using cash versus use of credit (bonding) in determining the most fiscally responsible method of financing the public works building. Have our city fathers (and mothers?) determined the cost of using that $10.3 million in cash, which is hopefully earning a nice return in this day and age of record-breaking Dow Jones averages versus the use of credit (bonding), whose cost (interest rates, which Andy estimates at $6 million) seems significantly lower now than in the (fairly) recent past. I don’t have those answers, but perhaps the council (and mayor) should be asked for the results of that kind of analysis prior to their 12/2 meeting…or is that the public hearing date? In Andy’s blog, he writes: “A public hearing is scheduled for December 2 and supposedly a vote is going to take place on December 16 (as always the public hearing is last).” On my calendar, December 2 comes BEFORE December 16. But I’ve never been great at math…or reading a calendar.

      Reply
      • 14. communitysolutionsmn  |  November 25, 2014 at 9:54 pm

        Tom my problem is that they’ve been talking about this building for years now. If you listen to the November 13 work session it is clear that some members have their minds made up and some were pressuring others to declare what they wanted to vote for in that works session. I suppose that is their prerogative but keep in mind all of this is before the December 2 public hearing. Why wasn’t the pubic hearing at the beginning or middle of this process? It’s what I always say about this city. They talk among each other and consult city staff and then that last people to get a voice in the process are the citizens they represent. At this late stage I doubt we are going to change anyone’s mind.

        The council has done some analysis already and like I said three options are being seriously considered; all cash, all bonding; or a mix of the two.

        I have documents that city staff provided me on the bonding and interest payments but I can’t find it on-line to link to. Maybe I’ll try to scan them but the schedule for payments begins in 2017 and goes to 2036. Going out 15 years has also been talked about (I don’t have numbers on that) which would lower the interest rates but raise the payments (like any other loan).

  • 15. communitysolutionsmn  |  November 25, 2014 at 7:19 pm

    Listening to the November 13 work session, postponing isn’t going to happen. The out-going members who have had years to vote on this are determined to vote on this no matter what, What the future council can do is up in the air since I don’t know how long it takes to write, sell, or repeal a bond.

    Reply
  • 16. ReNae Bowman  |  November 29, 2014 at 9:32 am

    I still don’t believe we need to build this building, this is the price Mayor Adam’s is paying to keep his cronies at public works and west metro happy. I tried to stop this building due to the horrible mess allowed at the old building. Did they really need more space? Who knows, the old building is such a mess it is a disgrace to those of us taxpayers who own the building and its’ content. I tried to get them to clean up their mess and we looked for solutions to a possible “over crowding” issues. The current public works building is a mess with junk lining 3 – 4 feet of perimeter walls. No one has looked at the real need or is this is just monument building to an old crony system. I ;believe the later. (Let along with geo-therma athat takes energy to make energy!)

    Reply

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