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June 2012
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FIT IT IN City Hall building solution shouldn't require tax hike

Paducah city commissioners were asking the right question last week about the proposed 2014-2015 city budget: Where is the money to finance renovation or replacement of City Hall?

Commissioners Carol Gault and Sandra Wilson posed the question to City Manager Jeff Pederson after he presented a rosy projection for the coming fiscal year that included 3.6 percent growth in city revenues, a $1.1 million cash reserve, and room for 2 percent increases in city department budgets, the first allowed in years.

Pederson said nothing is presently included in the budget for renovating or replacing City Hall because the city's final course on that project - estimated to cost $10 million to $15 million depending on the option chosen - has not been decided. He said simply that adding financing of that project to the budget would add $1 million a year to the city's obligations "without any revenue enhancement."

If in referring to "revenue enhancement" Pederson was suggesting some manner of tax increase, we think that's a non-starter. Certainly it is a toxic subject politically at present, with eight people including all four incumbent commissioners vying for the four commission seats this November.

We think the public supports doing something about City Hall, which after 50 years has reached the end of its originally designed useful life. But we don't think there's public sentiment supporting a tax increase to do it. And we don't think that is necessary.

The City Hall building has developed serious problems. Its canopy has sags of as much as nine inches at the corners, which have forced the city to block off large portions of the terrace below to protect city workers and the public. Its heating, cooling and electrical systems, among other basics, are at or beyond the limits of their projected useful lives.

But this is not a sudden development of the sort that should have caught the city by surprise. As with all capital requirements, the city should have been looking ahead to this day for some time now, and planning accordingly.

While we don't begrudge city departments the 2 percent budget increases, it is fair to ask whether with the building needs now looming there should be less in the way of increases and more in the way of bolstering financial reserves.

We also question whether financing a $10 million to $15 million project would really add $1 million a year to the city's debt service requirements. We assume the project would be funded through tax exempt municipal bonds. Interest rates are at near-historic lows due to actions the Federal Reserve has taken the past few years to boost borrowing and investment. And it strikes us that a building is a 30-year asset, not a 15-year asset, such that bonds to finance it could and should be sold over the longer term.

We're no experts, but we would think the combination of a longer payback period and low rates would allow the city to finance the project with significantly less debt service than $1 million a year.

The good news is that this discussion is far from over. It is expected to come up again in a city budget workshop scheduled for today. We hope city commissioners will make it a goal to find ways to fit financing for this project into their current revenue stream, especially if it continues to grow at the healthy 3.6 percent rate Pederson projects this year.

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