Unicorns and Fiscal Gaps: Recap of Robert Crown Meeting

When City Manager Wally Bobkiewicz first recommended Robert Crown’s new construction back in 2009, he suggested it was feasible to expect it could be done with no money to the City.

Left, Bobkiewicz recommendation; Right, Ald. Wilson response

As originally reported by Evanston Roundtable, “with little discussion, Council members followed the lead of City Manager Walter Bobkiewicz, who said, ‘We should make this a national project – and do it with no City money. … [We should] try to find a company to design, build, operate and finance the project with no cost to the Evanston taxpayer.'”

I think go for the whole enchilada,” Bobkiewicz had said. “I think there’s a company out there.”

Ald. Don Wilson was first to respond, saying he was in complete agreement. “This is to me, and I think hopefully most of us, this is or should be a top priority,” he said. “We are losing revenue opportunities.” The Council ultimately opted for new construction over renovations.

…Fast forward to Wednesday night’s meeting. Ald. Wilson found the idea absurd, denying such statements had been made. “If we could do it at no cost, I’d get everyone a unicorn,” he said. “Nobody ever said that.”

The City has continuously struggled to substantiate funding viability for a project that has advanced based on a series of hunches that often run counter to provided analysis. Wednesday’s meeting did not shed additional light on resident’s concerns. Here’s a recap of what was covered, with context.

Why Did Cost Keep Increasing?

Ald. Wilson’s responded, “It’s a big number, and it went up, that’s all I can say.”

We can say more.

+ $12M: New Construction vs. Renovation
August 2016 remains at $30 million

Increased Scope → $46.8M Sept. 2017
+$5.7M Addition of 25,000 sq. feet of larger and additional interior rooms
Addition of third artificial turf field
Other scope increases / costs

Turf & Soil Issues→ $43.4M million March 2018
1.5M poor soil – deeper foundation
+$1.4M increased contingency fee
+$.335M higher-grade infill for turfed fields
+$.6M more detailed design/schematics
+$.3M Mandatory addition of Public Art
+$? MWRD ruling turf fields are impervious surfaces, City must increase stormwater detention size

How Will City Fund $80.9 Million in Debt Repayment

The City reported 3 sources for financing the project’s $53.3 capital cost:

  • $47.9M (90%) in proceeds from bond sales
  • $5M (9%) in private fundraising
  • Remaining from other City funds

The bond debt obligates repayment of the $47.9M principal plus an estimated $33M in projected interest, totaling just under $81M. It also incurs about $176,000 in bond issuance and agent fees.

Debt will be Repaid with:

Unlimited Levy on Property Tax 96 percent of the debt ($77.6 million) is general obligation (GO) debt, backed in full by property taxes, in which the City has authorized an unlimited increase for repayment owed. The remaining 4 percent is from a sewer bond to be repaid by sewer revenue.

Staff reported $1.9 million GO bonds were issued for the project in 2016-17 ($3.1M repayment), $25.5 million last year ($39.9M repayment), and a projected $16.5 million ($30.6 repayment) this year. An additional $2.5 million ($4M repayment) was issued for the Crown library branch.

The City excluded debt service for the Crown library 2016-17 from Crown Debt Service. When asked why, staff said that debt payment was coming from other sources, later clarified as property tax revenue to the library debt service fund.

The City’s resolutions to approve all general obligation bonds, authorize provision “for the levy and collection of a direct annual tax for the payment of the principal of and interest on said bonds.”

Reliance on Donations Above Feasibility Cap Staff also suggested private contributions would be sufficient to offset spikes in property taxes to repay the debt.

Assistant City Manager Erika Storlie said the City is relying on an additional $10 million in private fundraising to smooth over debt payment jumps, which double next year and triple in 2025 to 2043. “Five million from Friends will go right to construction,” Storlie said. “The money we get from Friends of Crown, the extra $10 million, that goes to debt service over the next 20 years.”

However, that extra $10 million doesn’t exist, at least not yet. The City’s projection is also inconsistent with $5 million donation limit advised as feasible in City studies. Friends of Crown has collected $4.5-5 million in donations since 2016. The City reported an additional $6.5-7.5 is pledged, but not yet final. That still leaves $3-4 million outstanding.

And even if Friends is able to pull off the extra $10 million, that’s still falls more than $35 million short of funding required to keep debt service consistent to 2019 levels.

Transfers from Other City Funds The City has suggested interfund transfers from General and Parking Funds, as a way to offset the debt cost. However, with a $7.4 million budget deficit, and underfunded police and fire pension funds, these reserves are also limited. And shuffling costs from one fund to another without remedying the driving issue is considered a public finance “sin” as it only creates the illusion of a balanced budget.

Debt Security

Why is the project’s debt secured to property taxes rather than projected revenue? This question remained unanswered. The revenue potential for the new center has been a catalyst in approving each cost increase.

Staff said that $2.5M projected revenue from Crown programs and activities will go into a maintenance fund, rather than pay down its debt service. It did not further discuss preference for general obligation bonds over revenue bonds.

Revenue-producing projects are typically bonded to some degree by their revenue potential to repay the debt. General obligation debt is intended for capital improvement for projects that don’t yield revenue, such as streets, sidewalks and police and fire stations.

Bond Referendum & Hearing

Why no Referendum Typically bond referendums are held prior to issuing GO bonds, providing voters a say in deciding if a municipality should be authorized to raise funds backed by unlimited property tax increases.

When Wilson was asked why the City’s issuance was not a referendum item, he responded, “because we didn’t choose to make it a referendum.”

Council is able bypass a referendum by holding a public hearing instead. Wilson alluded to the hearing, saying that was residents’ opportunity to speak to the issue, and suggesting it had been covered extensively by media. Except that, that coverage only occurred after the hearing. The only prior mentions were published the day of the hearing, June 25, 2018, by Evanston Now and Evanston Roundtable.

Which would make sense, given that none of the City’s 11 media releases that month referenced the hearing, nor was it included in the City’s e-news bulletin. It also wasn’t published as an item on the Events Calendar until the day of the hearing. The City’s notification was limited to the minimum legal requirements: a classified ad in the Chicago Tribune, and flyers posted at the Civic Center.

Residents who were in attendance for that night’s City Council meeting said they were surprised when, after they had signed up for citizen comment, a second sign-in sheet was brought out, and they were informed it was for the mandatory public hearing regarding the proposed bond sale.

The hearing was held within the Council meeting. One commenter at the hearing, Ray Friedman, told Council he hadn’t received any hearing despite being subscribed to all the newsletters from the City of Evanston.

Public-Private Deals & Naming Rights

Another concern was if private donors, Northwestern and Beacon Academy specifically, were going to pay their fair share for the benefits they were receiving. “Beacon Academy had on their website, took it down, that this was their gym, and they were going to put their name on it,” he said, referring to the private school’s previous announcement that it had entered into terms with the City, and the gym and outdoor fields would serve Beacon students and bear it’s school name and logo, with separate facilities housing “dressing rooms and dedicated work space for athletic staff. The City has not released or confirmed these terms. Following negotiations with the school for a $500,000 donation, the City added a third turf field and additional interior rooms to the project design, tacking on an additional $4.4 million to the capital cost.

Wilson said the City wasn’t going to turn down any customers. “We’re not going to say no to them,” he said, adding he’d put names all over the place given the right contribution. “The negotiating, you get what you can get. At some point you have to go to the next one.”

Wilson also said Northwestern and Beacon would be paying user fees for their gym and ice time, though those fees also won’t be used to pay down Crown debt. Additionally he mentioned Northwestern contributed $1 million, twice that of Beacon.

Turfing on Outdoor Athletic Fields

In answering if the use of turf was a requirement, Wilson said the turf fields were a choice because they can withstand an extended playing season.

Artificial turf has added millions to the project cost. On average, it’s 2 to 3 times as expensive as grass fields, and has to be replaced every 8 to 10 years, which costs about $1.4 million per disposal and replacement. Early last year, the MWRD ruled the City had to increase the size of stormwater detention because turf was an impervious surface, adding $4.8 to the project price tag. The City had to select a more expensive infill following concerns and an EPA study that the type initially chosen potentially increased the risk of cancer.

Wilson said grass fields lead to sprained ankles, but “those kinds of hazards” weren’t as severe with turfed surface. This is not correct. Countless studies show higher rates of ankle, knee and head injuries on turf compared to grass. A 2013 study by the Journal of Sports Medicine found foot, ankle injuries are 3 times as likely, the American Journal of Sports Medicine cited a 67 percent increase in ACL injuries on turf.

Wilson also said turf would be less environmentally harmful than grass, but this is also not based in fact. While small turfed areas that withstand minimal wear and tear may have a similar carbon footprint to grass, that’s not the case with Robert Crown. Evanston is planning on 234,000 sq. feet, and each replacement adds 500,000 lbs of worn turf and infill into landfills. While you can skip fertilize and weed killer, you’re adding chemical disinfectants and solvents required to break down pathogens and remove organic matter done naturally with grass. Artificial turf still requires watering during hot weather, when the rubber underlay can reach temperatures as high as 117°F.

Capital Cost $53,321,389
Fundraising Consultant Services $771,593
Architectural / Engineering $3,246,483
Construction Manager – Pre-Construction $41,510
Construction Manager – GMP Fees $47,741,803
Furniture, Fixtures, and Equipment $860,000
Utilities $150,000
Field Equipment $125,000
Abatement & Consulting $50,000
Public Art $335,000
Source: Crown Center Pro Forma
Bond Sale Proceeds $47,950,000
CIP 2016-17 Series [1] $1,900,000
RC 2018A Series [2] $25,000,000
RC 2019A Series [2] $16,500,000
RC Library 2019-20 Series [1] $2,500,000
Sewer Bond 2019-20 [3] $2,050,000
Source: [1] Crown Center Pro Forma, [2] Evanston Debt Schedule, [3] 2019 Approved Budget pgs 225, 229
Other Fund Transfers $2,149,512
from Parking Fund [1] $1,500,000
from Capital Improvement Fund [2] $649,512
Sources: [1] Crown Center Pro Forma; [2] Evanston 2018 Bond Issuance Statement 6.C Interfund Transfers
FOC Private Donations $5,000,000
Friends of Crown 2019 $5,000,000
Source: Crown Center Pro Forma
Debt Service Iss / Proj $80,896,498
CIP 2016-17 Series* $3,059,000
RC Series 2018-19A $70,511,998
RC Library Series* $4,025,000
Sewer Bond* $3,300,500
Source: Crown Center Debt Service Schedule, *Assumed at incurred interest+principal/principal of 1.61% over debt life from Series 2018A
Bond Issuance Fees $176,292
CIP 2016-17 Series Issuance Costs / Agent Fees* $6,956
RC Series 2018A Issuance Costs / Agent Fees [1] $89,277
RC Series 2019A Issuance Costs / Agent Fees* $60,409
RC Library 2017-18 Bond Issuance Costs / Agent Fees, transferred to RCCC in 2018-19 [2] [3] [4] [5] $12,145
Sewer Bond Issuance Costs / Agent Fees* $7,505
Sources: [1] Evanston 2018A Bond Fee, pg. 8, 100% of 2018A RCCC allocated; [2] Evanston 2017A Bond Payment,  [3] 10% of 2017 A library allocated; [4] Evanston 2018B Bond Fee, [5] 7% library allocated; *Assumed at incurred .366% principal rate

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