City of Santa Monica Prepares to Bond Nearly $77 million for Greenest Building in California History

By Niki Cervantes
Staff Writer

August 4, 2017 -- Tackling a project touted for its environmental features and blasted for its cost, the Santa Monica City Council next Tuesday will hold a public hearing on its plan to bond out almost $77 million for a new uber-green annex to its 1938 City Hall.

Staff is recommending the City issue lease revenue bonds of $76.76 million to fund the City Services Building project, which was in effect approved by the City Council in January ("Council Rejects Appeal of $75 Million Santa Monica City Hall Annex," January 26, 2017).

At 50,200 square feet, the three-story building is approximately the size of the current City Hall and will house about 240 employees currently scattered in leased spaces into one location, as well as feature an emergency operations center.

The structure’s design is eco-friendly in the extreme, particularly for a publicly funded government building.

Designed to meet the Living Building Challenge -- the most environmentally rigorous standards to date -- the new building would eventually reach net-zero consumption and generate net-positive energy, and even include composting toilets.

It would be “one of the most sustainable buildings in North America and one of the first such facilities of its size built by a government agency,” the City said in a report to the council.

The lifespan is 150 years.

But the price tag is turning heads, particularly in a city routinely attacked as being too loose with taxpayer dollars for high employee salary and benefits ("Santa Monica Ranks Third in County for City Employee Compensation Costs, Survey Finds," June 23, 2016).

Although Santa Monica is a well-off community, and its City government boasts a $1.57 billion biennial budget, critics say the project is far more expensive than necessary and is taking funding better used for such needs as more affordable housing and park space.

City officials disagree.

"If not for the buildout of a City-owned facility, general funds paying for these leaseholds would not otherwise become available for other community-serving uses," Public Works Director Susan Cline and Finance Director Gigi Decavalles-Hughes said in a statement.

According to the City, the proposed bond covers a $258,000 feasibility study, about $7.4 million in design services, $61.2 million in construction costs and approximately $8 million for other costs.

Due in part to the anticipated bond, expenditures in the City’s budget for this fiscal year spiked $134.8 million beyond revenue, a gap it is closing with proceeds from the bond and tapping the fund balance and reserves ("Santa Monica City Council Approves Record Budget," June 29, 2017).

In a report to the council, the Finance Department said the bond is a fiscally responsible move given the City's "high credit ratings" and "favorable conditions in the municipal bond market."

“(T)he City’s adopted financial policies assert the prudence of using debt financing to distribute the cost of a facility over its useful life,” the report said.

During the appeal hearing in January, critics argued the project's price tag could end up being closer to $141 million after adding the cost of paying financing bonds over 20 years.

City officials say that with the cost of leasing expected to rise over the next 30 years to as much as $10 million annually, saving what the City spends to lease the current off-site spaces would significantly offset costs,

"It is projected that the annual lease savings will exceed the annual cost of construction financing after 16 years, and that the building will pay for itself well within its useful life," Cline and Decavalles-Hughes said.