Milwaukee County may need to explore non-traditional funding options to pay for its planned $345 million replacement of the Milwaukee County Safety Building in downtown Milwaukee, according to a new report from the Wisconsin Policy Forum.
Ideas explored in the report include partnering with the State of Wisconsin to pay for the facility or extending Milwaukee County’s portion of the 0.1 percent Miller Park sales tax to help pay off the courthouse debt once the Miller Park debt is retired by early 2020.
The cash-strapped county’s borrowing capacity would be exhausted for years to come if construction of a replacement for the 89-year-old Safety Building, at 821 W. State St., is financed under the county’s capital spending program, the report says.
The county’s budget includes maintenance of parks, cultural institutions and the Milwaukee County Transit System.
“There is little question that Milwaukee County needs to replace its Safety Building and even less question that to do so it will require consideration of financing approaches that fall outside of its traditional capital finance model,” according to the report.
The report is the fourth in the Wisconsin Policy Forum’s five-part series looking at local government infrastructure including City Hall, the Milwaukee County Courthouse, Milwaukee Police Administration building, the county’s Criminal Justice Facility, and the county’s Mental Health Complex.
The Safety Building replacement project is currently in the planning phase. Financing has yet to be determined.
The $345 million would pay for a new building (about $300 million) at the current site and temporary replacement services during construction.
The report released Tuesday outlined several financing options ranging from full public financing to public-private partnerships based on other courthouse financing approaches.
The new center would replace the county’s aging Safety Building, which was constructed in 1929, and is no longer suitable for the county’s justice-related space needs.
The four possible funding strategies outlined in the Wisconsin Policy Forum report include:
- Using conventional general obligation bonds and repaying the principal and interest with existing revenue streams. Most counties that used bonding for their facilities drew on special revenue sources, such as enhanced court fees or temporary sales taxes, to pay for the debt. Only one — Pima County, Arizona – financed its courthouse exclusively through general obligation bonds and traditional revenue streams, and that project “had a much lower price tag.” A concern with this choice would be affecting the county’s bond rating, which could impact future borrowing, the report found.
- Reducing financing costs and debt through new sources of capital. The county’s debt load could be reduced if the State of Wisconsin partnered with it to finance the project. Other states, such as Oregon and California, have established programs to share responsibility for major courthouse projects with counties. The county also could pursue a public-private partnership (P3) to provide the additional capital. While such a strategy would reduce the county’s indebtedness, Milwaukee County would need to find the resources in its operating budget to make room for the substantial annual payments required for a P3 contract, the report states.
- Creating new revenue sources for annual debt payments. The report identifies three new revenue sources to offset the debt costs, all of which would require state approval: a dedicated sales tax; reallocation of the current 0.1 percent Miller Park sales tax; or additional court fees or surcharges. In addition to considering a new sales tax, policymakers could consider extending Milwaukee County’s portion of the five-county, 0.1 percent Miller Park sales tax to help pay off the courthouse debt once the Miller Park debt is retired in late 2019 or early 2020. Doing so would raise about $15 million annually, or more than half of the estimated debt service costs associated with a 15-year, $300 million general obligation bond issue.
- Reconfiguring bond repayment to reduce annual debt service costs. The report identifies two alternatives within this option. The first is to extend debt repayment from the usual 15 years to 20 or more. This would reduce annual debt service payments and could provide greater flexibility in budgeting. The second alternative would be to structure the justice center debt so that principal payments would be delayed until the county pays off its pension obligation bonds in 2031.
The report does not make a specific recommendation to Milwaukee County.
“There is little question that Milwaukee County needs to replace its Safety Building with a major new justice system facility,” the report states. “And there is even less question that to do so it will require assistance from other levels of government and openness to financing approaches that fall outside of its traditional capital finance model.”
In addition to the Safety Building, the report found the Milwaukee County Mental Health Complex in Wauwatosa and the Milwaukee County Medical Examiner’s office downtown, should be fully replaced as soon as possible.
“These buildings are important not only for the public services they house, but also because their proper care and improvement impacts the ability of each government to spend capital dollars on quality-of-life assets like museums and parks, and on the transportation, water, and wastewater assets that are critical to our region’s economy and public health,” the report said.