Sounding Off: Letter left questions unanswered

I read with interest the Newport Beach city manager's recent citywide letter about the Civic Center project under construction. It seems to me that the letter left some important questions unanswered, such as:

(1) The city has now authorized more than $25 million on this project, being paid from cash reserves, I assume, since there is no financing in place, and started construction without either final construction drawings or construction costs. That is highly risky in the private sector in good times, and is almost never done now in these pessimistic economic times and very tight credit markets. Why has the city done so? City Manager David Kiff's comments that the city can scale back the project if the final price bids at the end of the year come in too high does not answer why spend $25 million of scarce and not easily replaced city cash to then scale down or mothball entirely this very expensive project.

(2) How is the city going to pay for this project? Now that $25 million of city cash reserves are committed and mostly spent, the city prudently should have its plan in place to pay final price since the city does not have enough free cash to likely pay half the final tab. Again, in the private sector there are few if any projects these days that proceed unless financing is firmly in place and all major loan contingencies resolved. Why did the city start work without financing in place? I have been told that city fire stations are being appraised. For what reason? Is the city intending to issue a bond for more than this Civic Center project to do other future projects? Which ones? How much will each cost? What happens if the capital markets freeze up again and no financing is available?

(3) The city, I have been told, is going to use federal Build America Bonds as part of its financing. Those bonds required the federal government to pay 35% of the interest cost over the life of these future city bonds. Why is our city, located in the center of one of the most Republican and conservative political areas in the U.S., increasing the size of the long-term federal deficit when Newport Beach residents far and wide decry huge federal spending budgets and also the growth of government in all areas as being out of control? Is laying off part of the cost of this Civic Center project to the U.S. part of the reason it has increased in cost from roughly $50 million when I left office to nearly $130 million today? The city long intended to build this project before these Economic Stimulus plan bonds came around. Why isn't our city living within its own means, paying only what the city can afford, before adding to our long-term national debt? How much will the city's intended financing plan cost the federal government — not just in year one but over the entire projected 30-year life of these pending city bonds — and then likely double that total because the Feds don't have that money and will need to borrow it? Or is all politics local so our city should get all it can no matter what the broader impact?

I recognize that there is much momentum in city government to make this new Civic Center a signature facility for which our residents can be proud, and that there is also a strong belief that construction costs are low so we are getting good value. But the city is not the Getty Foundation, the Performing Arts Center or other private foundation, which either has a huge endowment or raises what else it needs from the private sector.

Instead the city of Newport Beach must pay its bills by taxing and collecting fees from the public, mostly from us residents. It is past due for our City Council and our mayor to explain to us how this project reached its current $128 million cost estimate, why the city elected to commit $25 million of its cash reserves to it and start it before final costs were known or financing was in place, why in these very dire economic times the city is charging ahead in spite of what many think is a double-dip recession, and why the city is relying on the federal government, itself already firmly in the red and getting worse, to pay a major part of the cost of this rich, and seemingly ill-timed public project?

I could well be wrong, but our residents deserve more facts to decide for themselves since it is, in the end, their money.

JOHN HEFFERNAN is the former mayor of Newport Beach.

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