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New courthouse building would come with tax increase

Wednesday, June 13, 2012 by Michael Kanin

Construction of a new downtown Civil and Family Courthouse would cost the average Travis County taxpayer about $77 spread out over eight years.

 

That’s according to a preliminary analysis prepared by Travis County’s Planning and Budget Office that looked at the financial impact of a new building. The report says the proposed new courthouse would raise tax bills of county property owners from 2013 and 2020.

 

Planning and Budget officials briefed County Commissioners on Tuesday about an early cost analysis which aimed to make clear any financial differences between two potential construction methods. Property tax increases related to the construction of the courthouse would be roughly the same over the life of the project whether county commissioners elect to build the facility traditionally or with a public-private partnership, according to retiring county budget director Leroy Nellis.  

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However, there is a significant total cost variance between the two methods. As currently projected, the traditional approach would cost roughly $640 million. The public-private partnership could run up to more than $830 million.

 

In addition, upfront costs may also differ greatly. These could prove to be the difference maker. “I believe that this is the factor that the court needs to consider with going forward with one of the (construction) methods,” Nellis told commissioners.

 

In late 2010, the county paid $21.8 million to buy a lot at 3rd and Guadalupe Streets. The county plans to build a replacement for the Civil and Family portion of the Heman Marion Sweatt courthouse on the site.

 

A design-build process is the traditional approach: the county would hire a firm to design and build the facility. According to the latest staff estimate, if the court used that method, it could ultimately cost as much as $640 million.

 

This would include about $36 million in operations costs and debt service that would mount by 2020. The operations and maintenance costs would amount to $5.8 million.

 

In contrast, with a public-private partnership, the court would partner with a private entity that would finance much of the construction, operation and maintenance of the facility. The cost of such an endeavor is projected to be $838 million.

 

That would include roughly $35.3 million in operations costs and debt service by 2020. Here again the county would have to cough up operations and maintenance costs. However, Nellis told commissioners that this figure, at $16.8 million, would be much higher for the public-private partnership version of the project.

 

To raise those funds, the county would have to need to increase county property taxes about 2 cents over the next four years. The tax hike would account for more than $60 of the $76.58 that the average household would pay in property tax increases because of the project.

 

Whatever the county decides, Nellis urged the court to move fast. He pointed to a series of historical studies of recent Federal Reserve actions that illustrate that the Fed tends to raise interest rates significantly in the wake of a recession. Nellis argued that a mere 1 percent increase in interest rates could cost the county as much as $33.8 million.

 

“My strong recommendation to you…is to move expeditiously on this project,” Nellis concluded.

 

County officials are in the process of exploring construction options for the facility. As part of that discussion, they’ve empanelled an independent advisory group chaired by former Austin City Council member Betty Dunkerley to help the Commissioners determine the best construction option for the new courthouse building. The Planning and Budget team will present its analysis to Dunkerley’s group this evening.

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