In what some called the biggest decision the city has made in recent years, the Atascadero City Council unanimously agreed to take on a 30-year debt plan to pay for its share of its historic administration building.
The package will allow funding for the work with bond proceeds and also give tax increments for other economic development projects, according to consultant Mark Curran of financial firm Piper Jaffray & Co.’s San Francisco office.
Work to fix the cracked and broken 1917 administration building, which was damaged in the 2003 San Simeon earthquake, begins in September.
The money is slated to be available on or before Sept. 1, officials said, in time for the restoration groundbreaking. The Federal Emergency Management Agency has also agreed to pay $16 million for the project, slated for completion in 2013. The city is still lobbying to bring the money up to $28 million.
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The bonds are expected to be $16 million to $16.5 million, although up to $18 million is allowed.
There are “no increases in taxes or fees. No changes to anyone in the community,” Curran said of the bonds.
The city’s payments will start at $800,000 per year and eventually build to $2 million annually as the city pays off other debt. The payments will come from the city Redevelopment Agency’s $1.6 million annual balance after other debt is paid.
The bonds will be backed by the city’s general fund but will be reimbursed by its Redevelopment Agency — an entity formed to improve areas of the city using property tax revenue in that area. Property tax revenue could drop up to 35 percent in the future and still cover the debt repayment, Curran said.
The city backing is needed so the agency can use the city’s credit score to get a lower interest rate, Curran said, a move that shaves $4.8 million off the life of the bonds. Borrowing the new money won’t lower that rating, he added.
The city can also use the bond money to fund other Redevelopment Agency projects, such as building a pedestrian bridge over Atascadero Creek, working on downtown parking and adding a downtown restroom.
If the city chooses to pass its debt package through an election, Curran said, taxes would increase for residents, and a costly special election would be needed because it’s too late to sign up for the November general election.
The council also asked if the state could raid the city’s Redevelopment Agency funds, as it did in May, when $1.3 million was taken from Atascadero, one of many such cases statewide. But existing debt superseded state debt in those cases, Curran said.