Hays County bond adviser Dan Wegmiller of Specialized Public Finance, center, discusses a bond issue for a county government center with Precinct 1 Commissioner Debbie Ingalsbe, left, and Precinct 2 Commissioner Jeff Barton, right. Photo by Sean Batura.
By SEAN BATURA
Before the end of March, Hays County will issue $71.2 million in bonds to build a 232,000-square-foot government center to be located near Wonder World Drive and Stagecoach Trail.
In the same motion that authorized the bond sale this week, Hays County commissioners ordered that project contingency fund expenditures of $50,000 or more must be authorized by the court if costs for the government center total $67.5 million.
Government center project costs beyond the $58.3 million payment to construction firm Balfour Beatty include a contingency budget of about $3.5 million, $350,000 for courtroom technology and $4 million for furnishings, fixtures, and equipment.
If the county repays the bonds by 2036 in annual payments of $4.1 million at 4.66 percent interest, taxpayers will have spent $124,268,714 for the government center, according to projections Hays County Auditor Bill Herzog provided Tuesday.
The government center will be the largest single building ever erected by Hays County. It also will be the largest public project within the county to be undertaken without voter approval of the debt issued to pay for it.
Payments on the government center will be made from the 4.5 cents per $100 of taxable valuation built into the county’s maintenance and operations (M&O) tax rate to fund capital improvements. A penny on the tax rate generates about $1 million for Hays County, meaning 4.5 cents generates about $4.5 million per year.
The county began earmarking property tax specifically to address capital improvements in 2005. The rate stipulated was three cents before the commissioners raised it to 4.5 cents for the present budget cycle.
Commissioners expressed the hope that the full $71.2 million will not be needed for the government center. Representatives of project manager firm Broaddus and Associates (B&A) said they would continue to look for ways to save the county money. B&A Austin Area Manager Brenda Jenkins said her company already has saved the county $44 million on the project.
By November 2009, the county had paid $698,624.03 to B&A for eight projects, including $498,055.61 for managing the government center project.
“Our fees are not based on a percentage,” Jenkins said. “It is totally based on the scope of work that is required, the number of staff and the expertise required. B&A currently manages approximately $4 billion in projects. We have saved our clients our fees almost 100 percent of the time.”
Before B&A was hired in April to manage the project and right-size the building, architectural firm PBS&J’s design called for a structure estimated to cost between $100 million and $115 million.
The county paid PBS&J $2.4 million for design work related to the government center project before ending that firm’s involvement in the project last year. The county and the firm have been engaged in litigation over the status of the contract. Herzog said PBS&J had completed about 40 percent of its scope of work, and Jenkins said PBS&J’s “site analysis, utility review, space relationship and programming effort, allowed us to cut 20 percent of the time needed to get us to this new design outcome.”
B&A representatives told commissioners in June that a redesigned government center would likely cost between $70 million and $89.5 million. After commissioners directed B&A to work up a short list of design-build proposals calling for less than $89.5 million, three top design-build teams emerged with proposals of $78,123,343, $74,990,740 or $74,415,590, and $73,955,339.
Commissioners chose the least expensive proposal, offered by Balfour Beatty and HDR, though they said other criteria besides merely price were used in the selection process. In November 2009, commissioners executed a contract with Balfour Beatty specifying a not-to-exceed amount of $58,288,337 for design and construction of the government center. The county’s government center steering committee then anticipated about $15,667,000 in additional costs.
Due to a change in the estimate of the bond issuance cost, the total budget for the government center recently was reduced from $73.8 million to $71.2 million, according to B&A Senior Project Manager Bob Hinkle, who said the project has cost the county $1 million so far for design-related fees.
Proponents of the government center say current county offices and courts are overcrowded and ill-suited to the needs of staff and residents. Some officials in the past have gone so far as to call the Hays County Justice Center on Guadalupe Street “a dump” and “a disgrace.”
Hays County District Attorney Sherri Tibbe’s (D-Buda) office is in the justice center, which was an H-E-B more than ten years ago. Tibbe appeared before the commissioners court last October to report of inadequate accommodations for staff there and in other departments, such as adult probation.
“Their office space is divided by a pizza restaurant, and they have to walk down a hallway that they share with this pizza place,” Tibbe said in October. “There’s also a bar in the same area that we have probationers coming in and taking classes on why they shouldn’t be drinking or using drugs. And they can hear the noise and the music from the bar when they’re conducting these classes.”
Hays County Judge Liz Sumter (D-Wimberley), who expressed support for borrowing $60 million this month and $12 million next year, cast the dissenting vote against borrowing all $71.2 million.
“I don’t think the costs are fixed yet,” Sumter said. “There’s about $12 million in flux, so I prefer to know exactly how much I’m spending and what for.”
Herzog favored borrowing the money for the government center all at once to avoid the possibility of paying a higher interest rate for a second debt issuance later on.
“Who knows what the interest rate will be a year from now?” Herzog said.
Herzog projected the county would spend almost $1 million more in the long run if it borrowed $60 million this month at an interest rate of 4.66 percent and then issued $12 million in debt in 2011 at a rate of 5.25 percent.
Commissioners discussed the matter of the bond sale on Tuesday morning but held off voting until the afternoon so they could digest information provided by Herzog and the county’s bond advisor, Dan Wegmiller of Specialized Public Finance. During one of the discussions that preceded the court’s vote, Sumter said the county should not borrow more money than it needs to at any given time, and that having greater financial flexibility is more important than considering long-range costs resulting from interest rates on a future bond sale.
According to Herzog’s projection, at 4.66 percent interest, payments on the government center will exceed $4.5 million a year in 2013. Wegmiller told commissioners the available rate that day was 4.3 percent. Hays County Precinct 1 Commissioner Debbie Ingalsbe (D-San Marcos), who has spearheaded the effort to build a government center for years, said the county will probably be able to achieve an interest rate allowing for annual payments less than $4.5 million.
Balfour Beatty is scheduled to begin building the government center on April 22.
Commissioners court meetings will occur in the courthouse in downtown San Marcos even after the government center is built. The county judge, Precinct 1 commissioner and Precinct 3 commissioner will have offices in the downtown courthouse. Virtually every other county office would be housed in the new government center.