Long Beach City Council To Consider Using Budget Surplus, Reserves to Fund Courthouse Demolition

OldCountyCourthouse

The old county courthouse sits unused while city officials search for funds to finance its demolition. Photo by Jason Ruiz.

Facing the perplexing issue of where it will find the money necessary for the demolition of the old county courthouse, City Director of Financial Management John Gross proposed Tuesday that the city council approve a “down payment” from the 2015 budget surplus to get the project moving, with the potential to borrow the remainder from the city’s reserves.

During a presentation to the Budget Oversight Committee, John Gross recommended the city use approximately $3 million from the FY2015 budget surplus as a down payment for the project, followed by the issuance of bonds during a 10-year period to help repay any other monies borrowed for the project.

Gross characterized the large figure committed by the city as a “temporary use of cash” and would protect the the city’s bond rating, because it would demonstrate to rating agencies the city’s willingness to use available money instead of financing the entire project.

“If we proceed with the civic center, we need that courthouse demolished in order to proceed with the civic center,” Gross said. “That brings us to ‘okay, how are we going to fund the demolition?' Because we need to proceed very quickly."

The contract for the demolition of the courthouse is currently up for bid. The estimated annual cost at the current projected project value is $1.3 million annually beginning in FY2017. The proposal would require the city council to adopt a reimbursement resolution at the time of the awarding of the contract.

The courthouse, which currently is tying up land allocated for the new civic center project, has had its demolition process prolonged by rising costs, due to it needing "substantial asbestos remediation."

The current cost to tear down the courthouse is estimated at $14.5 million, with city officials saying the true cost would be known no later than October. The building needs to be taken down to minimize potential cost increases due to any timeframe increases.

Funding to tear down the old courthouse was expected to be covered by the successor agency to the redevelopment agency and cost between $2 million and $3 million. However, over the past year those funds have been denied to the successor agency, preventing them from providing the necessary funding, and the city is currently supporting legislation that would require the state to take on the financial burden of tearing down the courthouse.

“It was anticipated until very recently that the courthouse, which obviously needs to be demolished, would be demolished by the state since it was a state building and we thought it would be demolished by the successor agency to the redevelopment agency," Gross said. “That turned out to not be approved by the state. While we have legislation, hopefully, that will pass by the legislature and be signed by the governor, that is not certain.” 

If the effort to have the state fund the project is not reached by October—when the bid is expected to be awarded—Gross’s plan calls for the balance of the project cost to be borrowed from the city’s reserves. The reserves would be replenished by a bond issue with repayments of borrowed funds starting in FY 2017.

Former councilwoman Rae Gabelich addressed the committee with concerns over why the city might be footing the bill for a parcel of land that would most likely end up with a building belonging to the Port of Long Beach under the new civic center layout.

“Isn’t this land going to be where the Port builds their new facility, and wouldn’t it become a responsibility of the port to pay for that, versus it coming out of our surplus or general fund?” Gabelich asked.

Gross noted that while the current blueprint does show the courthouse’s footprint encompassing structures for both the port and city, so far negotiations over how costs would be shared have yet to reach a resolution. If a deal can be reached, it would most likely decrease the total sum needed to be financed by the city.

If the timeline that Gross drew out for the committee stays on course, the council will have until October to support or decline the financing option for the demolition of the courthouse.



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