City can afford civic center, leaders say

With city revenues expected to grow by $25 million over the next five

years, Newport Beach officials believe the city can well afford a

$46-million civic center.

The cost of upgrading city facilities, and whether the public

should vote on spending such a large amount, has been central to the

debate about the project.

City Council members are expected to decide in October whether to

proceed with the project, which would include a new city hall, a fire

station and a parking garage at the current City Hall site on the

Balboa Peninsula. Proponents have said that the current City Hall is

cramped, inefficient and desperately in need of more parking.

A report to the council on Tuesday showed the city’s property-tax

income is likely to keep growing, as it has nearly every year for a

decade. Property taxes are projected to rise from $60.1 million in

the 2005-06 fiscal year to $70.1 million in 2009-10.

Money is also expected from a planned Lexus dealership and other

sales-tax sources, and from hotel-bed taxes, particularly the resort

to be built at Pelican Hill, set to open in 2008.

Meanwhile, city spending is projected to grow by $12.2 million

through the 2009-10 fiscal year -- only about half the projected

growth of the city’s coffers.

To some officials, including Mayor John Heffernan and City Manager

Homer Bludau, the numbers prove that the city could easily pay for

the project.

“I think it shows that not only can the city handle it very well,

but there wouldn’t be any reduction in services, and there wouldn’t

be any reduction in what has been our investment in infrastructure in

the community,” Bludau said.

The report said the city now pays $1.26 million a year in debt

service, or 1.1% of the operating budget. Taking on the civic center

debt would hike annual debt service payments to $4.45 million -- 3.8%

of operations -- in the first year, declining after that.

Residents’ taxes won’t go up to build the civic center if the

council chooses to pay with certificates of participation. The

certificates are sold to investors as bonds are, but the debt is

repaid from the city’s general fund.

“It’s a big capital project, don’t get me wrong, but it’s not

overwhelming,” Heffernan said.

It’s still unclear whether the project’s financing would be

affected by a proposed ballot initiative that would require a public

vote on expenditures, such as the civic center, if the city borrows

money to pay for them.

The city also would have to pay for various kinds of insurance and

leasing space for city operations while the civic center is under

construction.

But cost isn’t the only factor. Council members must still decide

how to manage the project and how to lay out the facilities on the

site. They asked about where city operations could be temporarily

moved and how much it will cost, but Bludau said that can’t be

answered until the council decides whether to go ahead with the

project.