Downtown Slips to Float on $3-million Capital Infusion
by Carl Wagenfohr
CLEARWATER - In advance of the March 2007 referendum on the downtown boat slip project, the city painted a bright financial future for the project. The city's finance department forecast more than $9-million of operating profit for the facility over a 40-year period, including $4.8-million of payments in lieu of taxes that would go into the city's general fund.
City leaders promised that the operation would be funded entirely by its users, and would not be a burden to Clearwater's taxpayers. The facility would be cash flow positive, they claimed.
But just over one year later, the low bid for constructing the facility projected a far different image. The total cost to build the slips, parking improvements and pedestrian promenade, came in at $12,843,911, exceeding the original estimate by nearly $2-million.
During the April 14 City Council Worksession, City Engineer Mike Quillen explained the causes of the cost overrun. First, the city's specification for providing electrical service to the transient slip area was underestimated, Quillen said, accounting for about $800-thousand of additional cost. He said that electric service would cost $14,000 per slip to construct, comparable to other recently constructed marinas; "We think we're in the ballpark now," Quillen claimed.
A change in specification for additional wave attenuation components, required to calm the waves that could be built by a southerly wind, added $200-thousand of cost. "It was kind of unprotected in the original layout," Quillen said of the dock design.
In addition to an increased cost of materials for the docks themselves, Quillen explained that improvements to the upland parking, landscaping and walkways added another $800-thousand of cost.
If financed entirely by the issuance of bonds or a bank loan, the net effect of the increased costs would have been to essentially wipe out the first 20 years of profit, a risky proposition that would hold the taxpayers responsible for any revenue shortfall that might result from less than 100-percent slip occupancy.
Neither Mayor Frank Hibbard nor Finance Director Margie Simmons were prepared to take that risk. Simmons proposed "buying down" the debt with a $3-million capital infusion. That, coupled with a $1.2-million federal grant, would restore positive cash flow during the 20-year period of debt repayment.
Of the $3-million "buy-down", $1-million would come from the downtown CRA, and $2-million would come from the city's Special Development Fund, essentially interest earnings that have accrued to the city's unrestricted reserve accounts.
Only Councilmember Paul Gibson questioned moving forward with the project at Thursday's Council Meeting. "I didn't believe the numbers a year ago, and I don't believe them now," he said, "We have what I consider to be an above market slip rental at 100-percent occupancy; that's the formula for risk. And if we're wrong, it is general fund dollars."
The downtown slips construction contract was awarded to Misener Marine by a vote of 4-1, with Gibson opposed.
With the infusion of $3-million of additional capital, the downtown slips are projected to be cash flow positive for their entire 40-year economic life. But the Council did not discuss any alternative uses for the $2-million of Special Development Fund that will buy-down the debt.
Beach resident Anne Garris suggested that those funds should instead be used to build a smaller-scale public day-use docking facility on the city's downtown waterfront.
Alternatively, if that $2-million were invested at a 4.5-percent annual interest rate, the city would earn $90-thousand per year in additional revenue, a sum that could have great importance as the city prepares to reduce its operating budget because of the passage of Amendment 1 and the declining value of its property tax rolls.
In the face of the service cuts that will be considered during this year's city budget process, that $90-thousand could fund about 2 entry-level firefighters, 1 ½ entry-level police officers, or partially fund the continued operation of a rec center or library.
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