With multiple capital projects with hefty price tags on the horizon for Humboldt County the Humboldt County Board of Commissioners discussed the projects under consideration as well as available funding sources at its most recent meeting on Sept. 18 with Commissioner Tom Hoss absent.
Since 2018 the Commission has been looking at addressing many complicated issues at the Humboldt County Courthouse including space issues due to changes in legislation that require more trials to be held with juries. They also discussed concerns with Americans with Disabilities Act (ADA) accessibility in the courtrooms and at the front entrance of the courthouse and the Humboldt County Sheriff’s Office (HCSO). Other capital projects such as the outdated and failing HVAC system at the courthouse and the pressing needs for major updates to the Adult Detention Center at the HCSO and possibly an entirely new facility were also discussed.
Because of the extent of the capital projects, the Commissioners also had to evaluate what it would look like to raise taxes in order to fund the projects, acquiring debt, or another avenue that could potentially avoid debt.
Present at the meeting were representatives from Cushing Terrell Architects (CTA) and Public Finance Infrastructure Corporation (PFIC) to explain cost estimates for the four projects and how PFIC may help the County avoid going into debt to complete the projects.
Humboldt County Manager Dave Mendiola’s recommendation per the Agenda Request Form for the meeting is “that the Commission decide on which projects are of utmost importance and then commit to the next steps to adopt a financial plan, either a commitment to set aside cash aggressively over the next few years or adopt a Private-Public-Partnership that will allow construction to begin immediately and a commitment to annual revenues starting in approximately three years.”
Cost estimates from CTA
CTA Architect Angela Hansen, who has worked on many different projects for Humboldt County over the years, explained some of the cost breakdown for the projects to the Commission including engineering and land work, and age of the facilities and systems within that effect renovation versus replacement factors.
According to Hansen, a new stand alone justice facility to hold court will cost approximately $14.7 million, a new HVAC system in the current courthouse is estimated to cost $3.9 million, a renovation to the main entrance to the courthouse and HCSO to allow ADA accessibility would cost approximately $1.8 million, and a new detention facility for the HCSO would cost about $37.2 million.
Possible Tax Raises
Humboldt County Comptroller Gina Rackley, Treasurer Rhona Lecumberry and
Assessor Andy Heiser provided information about the current tax rates in the county, with Humboldt County having the third lowest rates in the state, and what a five cent and ten cent raise in property taxes would do for additional revenue.
Rackley said that raising property taxes by five cents would bring in an additional $147, 424.87 and raising taxes by ten cents would bring in $287,719.30.
The Board agreed that although no one wants to raise taxes at all and that taking on debt is not necessarily the desired option, the capital projects are totally necessary for the County to function and are becoming more important and expensive every day.
Rackley also said that Sixth Judicial District Court Judge Mike Montero has committed to contributing $1 million a year for three years out of his own budget to go towards a new justice facility and Union Township Justice of the Peace Jim Loveless has committed $350,000 of his budget to the project.
With Humboldt County receiving millions less in Net Proceeds distributions from the taxes on the mines (the most recent distribution is reported to have been $10 million less than the last) and other major developments in the County not bringing in revenue until 2025 at the earliest, these revenues are not necessarily a promising avenue to consistently fund the projects the Commission agreed.
Other factors, such as plans to move forwards with projects like a new facility for the Buildings and Grounds Department, the Public Communications project, the volatility of property tax, and a compensation study currently taking place in the County, will have an effect on funds that will be available for the capital projects, explained Rackley.
Alternative funding from PFIC
PFIC is a corporation that helps public and other entities finance infrastructure projects and allows the entities to participate in a lease back program where the entity is able to own the land that the infrastructure sits on and lease the building from PFIC until it is paid for within an agreed upon term, not requiring that the entity takes on any of the debt.
PFIC’s Jeff Lampkin said that PFIC is ready now to agree on terms for the projects. He also explained what lease payments would look like and different options for paying off the lease over a 30 year term or one otherwise negotiated.
The cost in order to do the County Justice Center, Detention Facility, Entry
Renovations, and HVAC projects would total approximately $57,542,000, for which PFIC would offer the County the ability to pay all of the interest on the lease during the early years of a negotiated term and the rest of the least over the remainder of the term or interest within the payments all at once.
Payments on a lease of that size would be upwards of
The County also has the option to utilize PFIC’s resources in many different fashions, including funding some of the projects separately or through a combination of cash reserves and or other revenues, which will have to be agreed upon once the Commission votes on the matter in the future.
Commission Chairman Ken Tipton asked the worst case scenario question—what would happen if Humboldt County defaulted on the payments?
According to Lampkin, because Humboldt County would own the title of the land that the possible facility would sit on, if Humboldt County were to default on the payments, the facility would go to the county after the remainder of the term expired. So, if Humboldt County defaulted 15 years into a 30 lease term agreement, PFIC would find another use for the facility for the next 15 years until the full 30 year term expired and then the facility would go back to the County because they own the land.
Payments for the lease back could be arranged in multiple ways, as explained by Lampkin, with each scenario there would be no payments required for the first three years of the term and then the option for the County to pay off the interest on the lease first, for years four through 10 of a 30 year term and years 11 through 30 would pay directly to the principal.
A second option would allow the interest and the rest of the payments to be paid all at once in each payment for the term of the lease, which would be agreed upon if Humboldt County enters into an official agreement with PFIC. Lampkin also explained other options like refinancing and early payoff that could be helpful in the Commissioners decisions.