Council reviews project funding

County might ask private lenders to finance building, plant expansion

May 20, 2007|By Mary Gail Hare | Mary Gail Hare,Sun Reporter

Concern over the price tag of two capital construction projects has County Council members calling for alternative financing, using private instead of public money to build a $40 million county administration building in Bel Air and a $60 million expansion to a trash-to-steam plant in Joppa.

Those are but two of the $370 million in capital projects included in the county administration's nearly $1 billion spending plan, and both likely will top the agenda Tuesday as the council proposes final amendments to reconcile expenditures with revenue.

"Everyone realizes that these are two projects that should move forward," said council President Billy Boniface. "Instead of a battle Tuesday night, we are looking for solutions."

One solution could be alternative financing. Instead of borrowing millions through bond issues and burdening taxpayers with years of loan payments, the county could look to the private sector. The approach being talked about by county officials is essentially a lease-to-own arrangement. The government gives the project to a builder or developer, who pays for construction and then leases the building to the government until it is paid off.

There is precedent in Harford: The school board built its $11 million administration building two years ago with private funding.

"Reliance on a third-party private market will get a capital project done sooner," said Thomas Fidler, school board vice president and a commercial lender. "We tried to get that building built for 15 years and never made it through the budget process."

At the time, the board was spending so much for rent at more than a dozen locations, it became cost-effective to build one headquarters, he said. The administration moved into the building in January 2006. The annual rent for one building is about the same as all the previous rentals combined, but this outlay is more like a mortgage and will result in county ownership of the building within about 20 years.

The traditional funding philosophy is to borrow money at low interest. But that also entails a lengthy approval process, especially for school construction, Fidler said. It is frequently two to three years from planning approval to groundbreaking, and building costs increase during that time. Letting private industry finance the project might cost a few more percentage points in interest, but those costs are offset by escalating construction fees, Fidler said.

"The time involved in getting a public project approved costs us more in efficiency and effectiveness," Fidler said.

County officials envision a five-story office building that would consolidate functions from 12 locations spread throughout Bel Air, Forest Hill and Edgewood.

The proposed expansion of the 19-year-old Harford Resource Recovery might pay for itself. A larger plant would increase the output of steam energy, which the plant sells to Aberdeen Proving Ground, a base that will undergo significant growth within the next four years.

"We are certainly hopeful that the council looks beyond the recommendation to all the benefits of these projects, which both have to be addressed," said Robert Thomas, a county spokesman.

Opposition to keeping the projects in the budget appears to be growing. The county's budget advisory board, a volunteer residents group that attends budget hearings and reviews fiscal documents, has recommended seeking private instead of public money to build them.

"We are not against the new buildings, but there needs to be a revenue stream to build them," said Robert Johnson, advisory board chairman.

Councilman Dion F. Guthrie said he will push for alternative financing.

"We can't strap the county with these two big projects," Guthrie said. "We have to look elsewhere for financing."

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