Santa Rosa set to talk funding to reunify Old Courthouse Square
Santa Rosa has endlessly debated just about every element of its proposal to reunify Old Courthouse Square — except how to fund it.
That’s about to change as the City Council, prodded by downtown property owners and business leaders fed up with years of inaction, has begun exploring some novel ways to pay for the project, estimated to cost between $8 million and $17 million.
City finance staff Tuesday outlined an array of funding options available to the council, including general obligation bonds that would need to be approved by voters and assessment districts that would tax downtown property owners.
But Chief Finance Officer Debbie Lauchner told the city’s downtown subcommittee there was only one way to come up with enough cash to get the first phase of the project underway by May — borrow it.
Lauchner said she recommends the council consider using tax-exempt financing tools called certificates of participation to quickly raise the money needed to reconnect the plaza bisected decades ago by Mendocino Avenue.
“It’s a lot like a mortgage,” Lauchner said. “We just have a method to make it a lease rather than a debt.”
In essence, the financing would work like this: The city would identify a piece of property valuable enough to be used as collateral for the money it needs to borrow, and transfer that property to a lender or investor willing to lease it back to the city long-term, Lauchner explained.
In this case, Old Courthouse Square itself probably wouldn’t be used as collateral, but rather a city building or campus, like City Hall itself, she said. The city used a similar method to help fund the construction of the new Fountaingrove fire station, using other fire stations as collateral, she said.
The method is a common way for cities to raise money without having to ask voters to raise taxes, she said. Rohnert Park used it to build a public safety building and library, and Novato, where Lauchner once worked, funded a solar array by leveraging its teen center, she said.
The trick is that the city needs to be able to demonstrate its ability to make the lease payments. In this case, a $10 million project, if fully funded with such certificates, would cost the city’s general fund about $670,000 per year for 30 years, or a total of $20 million.
If the $17 million version, complete with water wall, kiosks and light arbors, were pursued — a version no current council members support — the costs would soar to $1.2 million per year, or $34 million total.
The strength of the certificates is that they are fairly easy to set up, taking about four months. The downsides are that the borrowing doubles the long-term cost of the project and can be tricky to explain.
“(Certificates of participation) are complicated to explain, but they are easy to manage,” Lauchner said.
It is far from clear how much money the city might need to borrow to complete the project. It could easily be a blend of certificates and other funds. Other sources could include excess general fund reserves of about $6 million, $6.5 million pending from the sale of the Hyatt property, $1.3 million set aside for water and sewer upgrades, and parking funds that could be used to construct about 50 additional on-street parking spaces, Lauchner explained.