Rehoboth officials debate costs of new city hall

With outfall project on deck, officials ponder funding
Rehoboth Beach officials are looking into the financial issues involved with building a renovated and rebuilt City Hall complex. Preliminary estimates have put the cost at $13 million, but officials are unsure if the city will be able to pay for the City Hall project and the proposed ocean outfall project. SOURCE FILE
November 27, 2012

Rehoboth Beach officials have agreed on a general concept plan for a new City Hall complex. A city task force is now taking up the elephant in the room when it comes to this project: money.

Design firm EDiS submitted new cost estimates to the City Hall Complex Master Plan Task Force, projecting a $13 million project.

The task force agreed that it’s next move, now that the concept is set, is to bring in financial experts to look at the city’s ability to borrow money.

The main question is how to balance paying for the city's stormwater outfall project – for which the city has committed to borrowing $25 million from state and federal sources to build an ocean outfall– with the city hall project.

At the task force’s Nov. 1 meeting, member Jim Horty said, “Is it doable?”

After the meeting, Commissioner Stan Mills said, “We have a lot on our plate, financial-wise with the wastewater treatment plant. The funding route there is selected and somewhat moot. It’s a matter of how much debt do we want to take on.”

Mills said the city will be retiring some debts, such as a loan for the water tower, freeing up some money.

“I feel comfortable we will be able to finance this new project,” he said.

Mayor Sam Cooper said the project is doable, although he is not quite sure he’s ready to move forward at this point.

“How we would fund it would obviously be a huge discussion,” he said.

The $13 million estimate is down from the $20 million figure EDiS proposed in September.

Rick DiSabatino, executive vice president of EDiS, said Nov. 1 that the proposed square footage had been reduced. Mike Wigley, archictect with Davis, Bowen and Friedel, which is helping EDiS on the project, said the only changes were relocating the police sally port – which had been on the rear end of the convention center – to allow more space for trucks to service the convention center.

Wigley said the revised plans call for eliminating 2,000 square feet to reduce costs. Preliminary estimates call for 36,000 square feet of new construction, an estimated cost of $9 million.

DiSabatino said costs were also reduced by not factoring in state wage rates, figuring the city would not receive state funds for the project. EDiS’ cost estimates also include $2 million from the sale of the building and licensing office at 306 Rehoboth Ave. All along, city officials have stated their desire to have the major city departments all under one roof. Cooper said this would make it easier for the city to manage its key employees.

Some members of the task force have discussed possibly breaking out the police station, something Cooper said is a possibility that warrants further discussion. He said it was important the city have a presence on Rehoboth Avenue.

Mills said, “I think one of the next steps is for the committee to actually focus on the financials. We’ve somewhat put a hold on further design. What we have designwise is sufficient to give us an approximation of construction costs.”

Cooper said what the city needs to wrestle with is the cost-per-year in paying back a loan, since it does not appear that the city will pursue state funds. One avenue is possibly going onto the bond market, but Cooper said that could come with its own challenges.

“Any loan that wasn’t from another government agency, you’d have to go to Moody’s or Standard and Poor’s and those places and get rated. You have to give them all your financials for five years,” Cooper said.

The agencies would look into the city’s finances both to determine the interest rate and the likelihood the city could repay its debt.

“One of the tougher things we would have, if we would try to get rated right now, we have the looming borrowing for the wastewater project. I think the rating agencies would look at that and say, ‘Whoa, you already are going to have to borrow a lot of money for that,” he said.

Cooper said the annual repayment schedule is also a concern.

“How much would the city have to find in revenue to fund the project?” he asked.

Mills said Cooper would be working with city accountant Burt Dukes and Commissioner Bill Sargent to look into the funding of the project, including possible financial and loan opportunities. He said the task force would also discuss finances at its next meeting, which has not been scheduled yet. Once the financial situation is clearer, he said the next step would be bringing the concept plan and estimated costs to the city commissioners.

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