BY KYLE MARTIN
Daily Post Staff Writer
Palo Alto City Council tonight (Feb. 1) voted to start construction of a $118 million police building, although Vice Mayor Pat Burt and Councilman Greg Tanaka said this isn’t the right time given the economy.
Voting in favor were Alison Cormack, Tom DuBois, Lydia Kou, Greer Stone and Eric Filseth.
Council approved a construction contract with Swinerton Inc. to build the police station at 250 Sherman Ave. in the California Avenue district. Council also accepted City Manager Ed Shikada’s recommendation to finance the project by selling Certificates of Participation, a method of borrowing that doesn’t require voter approval.
The city will mainly use hotel tax revenue to pay back lenders who buy the certificates. The city will have to pay about $5 million a year, and a third of that will be in interest and fees to Wall Street firms.
The new police station is expected to be finished by summer 2023.
But the city will have to scrape to find enough money to pay the new $5 million annual encumbrance. A budget forecast predicts that the city’s hotel tax revenue in the current fiscal year, which runs through June 30, will be $4.75 million.
And the city’s finances are tight. In May, council was forced to “brown out” or partially close fire station No. 2 at 2675 Hanover St., serving the College Terrace neighborhood in order to save $831,555 annually.
It wasn’t clear tonight what budget items the council would cancel in order to make payments on the police station. Burt was concerned that the council also hadn’t had a discussion of its overall capital improvement budget, of which the police station was the biggest element.
Burt and Tanaka wanted to delay the project’s initiation until a later date.
The new police station will be 56,000 square feet and three stories tall, with an additional two levels underground. Covering an entire city block, it will house the Police Department, Fire Department administration, the 911 emergency dispatch center, the Office of Emergency Services and the emergency operations center.
The new building would replace the existing police station that opened in 1970 at 275 Forest Ave. The current station is about 25,000 square feet and doesn’t meet seismic safety standards, according to the city.
Two council members, Tanaka and Stone, said they wanted to see the seismic report that said the police station was unsound. But the city employees participating in the council meeting were unable to produce the report immediately.
The cost of the new police station has doubled since fiscal year 2018, when the city’s capital budget listed it as a $57.8 million project.
“Things have changed since 2018,” Burt said. “The world has changed and our budget has drastically changed. So the notion that we can necessarily have all things that we thought were possible two years ago is not realistic in my mind.”
The city has been setting aside a portion of its hotel tax revenue for the new police station, as well as other projects included in a 2016 infrastructure plan. The funding is coming from an increase in the hotel tax, from 12% to 14%, that Palo Alto voters approved in November 2014. Voters approved another increase in the city’s hotel tax, to 15.5%, in November 2018. Hotel tax is also known as the transient occupancy tax, or TOT.
In addition, two Marriott hotels are expected to open next month, with about 301 rooms combined, and the city will reserve all the hotel tax from those properties for infrastructure, according to a report from Shikada for the council meeting.
To save costs on the building, Burt suggested the city cut out one of two levels of underground parking, but city Public Works Director Brad Eggleston told Burt that change would delay construction by about a year.
Tanaka suggested that instead of saddling the city with new costs, the council rehire more police and firefighters. He said, “people provide the services,” not the building.
He said he’s heard from people in the College Terrace neighborhood that they’re not happy with the fire station brown out, and wished the $5 million were spent on restoring fire and police services.
“It doesn’t do any good to have a new facility if you can’t render emergency services presently during the existing emergency,” Palo Alto resident William Ross told the council during the public comment portion of the meeting.
And Kou agreed with Tanaka. Kou said, “I would rather have personnel.”
“Yes, I would like the building. But it’s about a timing issue right now,” Kou said. “This project is not right for right now. It just seems like there is no choice if we’re going to be going back on our word to the people who came to the table to work with us.”
But then Kou voted to approve the project anyway.
DuBois and Cormack both said the time for the police building is now.
“I do think we’ll end up having to be flexible on other projects as they come up,” DuBois said. “We’ll need to look at where our revenues are and readjust.”
Cormack told the council that if they delay the project any longer, the project’s cost will only increase later.
“I don’t think more analysis will help us or change our mind. I think the mayor laid out perfectly the need, the finance and the timing,” Cormack said. ‘This is the right thing to do and now is the right time to do it.”
Several issues arising from this story.
1. How did the bid come in at double the estimate of three years ago when the project was approved? The construction market was booming back then so it’s not like cost levels doubled in three years. A cynical sort would suspect that staff has once again lowballed cost estimates at the time of initial council approval.
2. The use of Certificates of Participation are common with California municipalities but that doesn’t make them any less dishonest as a way to get around the state’s requirement that bonds (which is exactly what they are) be approved by a vote of the people.
3. If Council members wanted to review the question of seismic necessity, why did they wait until the meeting to request a copy of the report? That’s something you do days prior to the meeting.
4. The reporter’s comment that one-third of the money spent will go to Wall Street firms is just wrong. A small part of that will go to the firms that sell the bonds but most of it is interest that we pay to borrow money, just like when you buy a house or a car. Most of those bonds will be purchased by the well to do of whom we have so many here in Palo Alto that will allow then not to pay income tax on their interest earnings.
I’ve got to disagree with point 4. The COPs will be bought by banks who will borrow money from the Fed at a fraction of 1% and then collect interest at something like 2.4%. Very few individual investors will buy these COPs. Sure, as a PR move the city will advertise them to their residents, but 99% will be purchased by Wall Street concerns who will get a huge return on their investment while doing no work. That’s how the muni bond market works.
The Police Department’s size will go from 25,000 sq ft to 55,000 sq ft? Why is such a large expansion necessary? Does the council anticipate a crime wave is coming? Are new laws in the works that we’ll need more cops to enforce? Are we going to turn into a police state?
It was shocking to hear Tanaka fumble around when discussing COPs. He wondered why property owners couldn’t be required to pay them. Yet he was on council three years ago when council asked voters to increase the hotel tax to pay off the COPs. Did he forget that? Or didn’t he understand why council pushed for the higher hotel tax? [Portion deleted — please avoid personal insults]
Lydia Kou should have followed her instincts last night. She asked a very logical question: Why can’t council take money meant for the police station and use it to reopen the browned out fire station? (I’m paraphrasing her exact words.)
She was shot down by her colleagues, most notably Eric Filseth. They made it seem as if the hotel tax money was irrevocably earmarked for the police station, and nothing could change that. (Again, I’m paraphrasing.)
But Kou was right. The hotel tax measures Palo Alto voters approved were for “general local government purposes” and needed only a simple majority approval. If the taxes had been for a specific purpose, they would have required a two-thirds approval.
By law, the hotel tax revenues can be used for any lawful government purpose the council desires. If council wanted to spend all the money on libraries or the homeless, that would be permissible.
Lydia was on the right track. Take the hotel tax and use part of it to reopen the fire station. When the economy improves, start the police station project.
Unfortunately, she lacked the courage to follow through on her words. Maybe that was because she wasn’t sure of herself. Maybe she was intimidated by Filseth’s mansplaining.
Next time, Lydia, trust your instincts.
Nice building. It looks like our children and grandchildren will have a role in this place. They’ll have to pay for it. And they’ll probably get arrested at some point and be brought in there and accused of a crime they didn’t commit.
The wage and hour department needs to investigate the Police Department based on what I heard last night. One of the city officials said that the dispatchers have to work in the basement for long hours and they arrive before the sun comes up and leave when it is dark at night. He said they don’t get to see any daylight. The law requires that they get one 30 min break for a meal and two 10 min break. They could use that time to go outside in the sunshine. But based on last night’s presentation, that’s not allowed. That was given as a reason for building the new police station but I think the issue is more about the police obeying the law now.