Is this good or bad? We really can't tell
From a Chronicle story by Matt Stiles:
After serving as a staging area for the Hurricane Rita recovery, the troubled Houston Emergency Center got a cleanup of its own this week, as city officials moved to refinance a lease deal and buy the building.
City Council approved a plan Wednesday to pay off the building with government bonds rather than continue with its lease. Officials said the decision could save millions of dollars.
Okay, this sounds pretty good:
The city likely would get a better deal by financing the building itself, rather than depending on a lease with an annual payment of about $4.4 million, said Jim Moncur, deputy city controller. "The essence of this deal that we're doing is simple: We're doing a refinance to save some money," he said.
Or maybe not:
The original deal under former Mayor Lee Brown was a "lease-purchase," in which a private developer took out a loan instead of the government issuing bonds. The advantage is that the city doesn't have to hold a bond election, dip into its capital fund or competitively bid the project. The disadvantage is that private developers can never get as low an interest rate as the government.
It isn't a lease in the commonly understood sense because the government owns the building for property tax purposes and at the end of the lease term, the government "buys" the building for $1.
The Houston Chronicle reported in 2002 that the city had done no comparative study of the center's construction price of $274 per square foot.
Under the current lease which runs through 2027, the city would pay about $95 million to settle its contractual agreement.
The new plan, more typical of how the city usually finances buildings, would cost an estimated $89.5 million, a $5.5 million savings over 20 years.
Mayor Bill White, who wasn't in office when the unusual lease arrangement was signed, said the refinancing was about saving city money.
The decision wasn't without controversy.
Councilman Mark Goldberg, who spent the night at the building as Hurricane Rita approached the Gulf Coast, didn't question the building's ability to serve its mission.
But he said the original deal was bad, and that the city ought to continue leasing so a future council could have the option of building a new, cheaper facility.
He said the technology could be obsolete in five to 10 years.
"We're only saving money with the assumption that we are going to stay in this building for the next 25 years," said Goldberg, who voted against the plan along with Councilwoman Shelley Sekula-Gibbs. "A building of that size, with everything that it offers us, certainly could be built cheaper."
Do any of our smart commenters (we have the BEST commenters!) have thoughts on whether this is good or bad for the city?
Posted by Anne Linehan @ 10/07/05 08:58 AM | Houston Politics | Print | Comments (2)
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