San Mateo County is nearly set to price and sell bonds this spring for its new jail but Board of Supervisors President Dave Pine questioned if it might be better not to finance the entire project and instead use extra money earmarked to shrink unfunded liabilities.
During a mid-year budget update Tuesday morning, County Manager John Maltbie laid out a timeline for getting the bonds to market and noted that the total size is projected at $215.4 million which includes the roughly $17 million the county already paid for the Redwood City land east of Highway 101, $165 million for the construction and the rest for interest payments, the investor-required reserve and the expense of legal, financing and underwriting.
The funds already spent on the land will be repaid to the county’s capital fund for later use, Maltbie said.
But Pine questioned if the county should borrow the entire amount for the jail, including money already spent on the land, through the bond process when there is extra revenue coming into the county through various tax streams. Instead, he raised the possibility of using the county’s money to decrease the bond amount rather than spending it to rein in retirement obligations.
Maltbie said the choice ultimately falls in supervisors’ hands but that in his opinion pensions are the better choice to target.
“We have this bucket of liabilities and we’re either borrowing money for a new facility or we have the unfunded liabilities and the pensions,” Maltbie said. “So it really becomes which liability do you want to shrink?”
Last August, the Board of Supervisors unanimously agreed to accelerate its paying down of a near-billion dollar unfunded pension liability with a $50 million kickoff payment followed by $90 million over the following nine years. The payment plan, using a combination of department reserves and excess property taxes known as Educational Revenue Augmentation Funds, will drop the county’s annual required contribution by $13 million by 2023-24 and approximately $16 million by fiscal year 2041-42.
Pine and Supervisor Adrienne Tissier agreed to meet with Maltbie ahead of the board’s March meeting to approve the jail financing structure. Currently, the tentative date for pricing the bonds is April 2 with them going on sale April 23.
The new jail is scheduled to open in 2015 with 576 beds for both men and women on three stories and 40 feet of unfinished space known as a warm shell which can be developed in the future if the need arises. Future buildout can be up to 832 beds.
The jail financing was just one piece of Maltbie’s midyear budget update in which he painted a pretty rosy picture of the county’s finances.
“I’m pleased to report this morning that the county’s financial condition continues to improve as the economy continues to recover,” Maltbie said.
Maltbie pointed to the number of properties restored or in the process of being restored to full value, a drop in the number of assessment appeals and seven- to eight-year maintenance of reserves at 20 percent or around $200 million.
“It’s an exceedingly strong position for a county to be in,” Maltbie said.
Revenue projections for the next five years have moved from “conservative to the conservative-moderate range,” with overall growth through 2019 estimated at 2.7 percent to 3.1 percent. Property tax is projected to grow about 3.5 percent annually and the Measure A sales tax — initially estimated at $68 million annually but now updated to $71 million — will see 3 percent to 4 percent increases over the next five years, he said.
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