LCF Council approves 30-year loan, further reserve withdrawal to fund $18.3M City Hall
La Cañada Flintridge city officials decided Tuesday to take out a 30-year $4.91-million loan and draw another $1.43 million from general fund reserves to fund a new city hall whose total cost now stands at nearly $18.3 million.
In 2016, the city purchased the 27,881-square-foot former Sport Chalet headquarters building for $11.23 million, taking $5.65 million from reserves and receiving an interest-free promissory note from the original owner for the remaining $5.58 million.
Officials have since dedicated another $3.07 million in reserve and property acquisition funding toward the purchase. The sale of the current city hall added another $3.23 million to the pot.
But hiring an architectural firm and securing financial and project managers, furnishings, exterior improvements and a $4.79-million construction contract added $7.06 million to the initial purchase price, leaving officials with a $6.34-million funding gap.
On Tuesday, the City Council voted 3-2 to close that gap with a hybrid financing plan option that includes the additional withdrawal of reserve money and an Infrastructure State Revolving Fund (ISRF) loan with a 3.21% fixed interest rate.
The annual debt service for the borrowed amount will be $266,800 — an amount that may be offset by annual $86,150 in lease revenue the city will take in from an on-site Montessori school and an annual $213,840 from tenants leasing space inside the new city hall.
While they roundly agreed on the soundness of the loan, which can be prepaid without penalty after 13 years, council members debated among themselves how much reserve funding should be spent on the new administrative headquarters and how much should be saved for future needs.
City Manager Mark Alexander presented a reserve fund policy that provided a breakdown of how much money the city would need to cushion itself from the shock of unforeseen circumstances, such as natural disasters or severe recession.
Drafted with assistance from Irvine-based municipal advisory firm Fieldman, Rolapp & Associates, the policy recommended general fund reserves maintain a balance of at least $10.2 million.
That amount would comprise at least half the city’s current operational revenues ($7.2 million), with an additional $1.5 million for disaster response, $1 million for economic stability reserve and $500,000 for paying out post-employment benefits — amounting to about 70% of the city’s current operating revenues.
“The proposed policy is not a maximum, it’s a minimum,” Alexander said. “You can always grow your reserves.”
Councilman Greg Brown expressed concern the new amount was significantly lower than the 100% to 150% commitment adhered to by past city council members.
“The reserves are there for a reason, and that’s to do things like buying a new city hall,” he said. “To me, we should still have the goal and we should still have the target of rebuilding those reserves.”
Mayor Terry Walker agreed the funds should be replenished over time but said she saw no problem with accepting a policy that concretely states a suggested minimum that should not be dipped below. Previous lofty goals were arbitrary amounts that, in time, became psychological barriers to spending, she said.
Councilman Jon Curtis agreed.
“We’ve got to have some rational reason for having the level we’re going to have,” he said. “We’ve had citizens saying, ‘Why aren’t you spending it on us — why are you packing it away?’”
Mayor Pro Tem Len Pieroni said he’d rather keep a higher threshold and ultimately cast a dissenting vote on approving the reserve fund policy alongside Brown for the final vote.
Twitter: @SaraCardine
