A new financing proposal for a town hall in Zionsville could save the municipality money in the long run, even though the price tag for the building has increased.
The Zionsville Town Council met Thursday night to informally discuss how it could pay for a new $10.2 million town hall that would be constructed directly to the north of the existing building, a former church on Oak Street.
Previously, the town had considered using traditional bonds backed by property taxes. Under that proposal, the Zionsville Redevelopment Authority would have issued bonds and leased the new town hall to the Zionsville Redevelopment Commission. Once the bonds were paid in full, the redevelopment commission would have taken ownership of the building and then conveyed the facility to the town.
The bonds would have been up to $9.135 million, and the redevelopment commission would have agreed to semi-annual lease payments of $732,000.
Early propsals included a 35,000-square-foot building that would have cost $7.5 million, but plans presented Thursday outlined a two-story, 44,000-square-foot facility that would cost $10.2 million, a cost that would include demolishing the former church and constructing a new center roadway aligned with Brenden Way on the nearly 7-acre property.
The new financing plan suggests the town purchase the building over time with lease payments instead of using bonds.
“You’re buying the town hall on contract,” said Barnes & Thornburg LLP attorney Bruce Donaldson, who specializes in municipal finance.
Donaldson said in the last five to six years that's become a more common way for municipalities to finance construction because it saves money on interest payments.
Under the proposed arrangement with Indianapolis-based Keystone Construction Corp., the town would receive a 2.75 percent interest rate for 10 years. After that, the rate would be re-evaluated. Payments could continue for up to 25 years.
Angie Steeno, senior manager for Crowe Horwath LLP, admitted there is a risk involved at the end of 10 years, because the rate is unknown.
“I really can’t look to see that far out,” Steeno said. “This is really just based on today’s project and today’s revenues.”
The town could use revenues from the county option income tax, food and beverage tax, cumulative capital development fund and two tax increment financing districts to make lease payments.
“You are not locked into using any one type of revenue,” Steeno said, adding that it will be the council’s discretion every year.
Steeno’s projections kept revenues flat for the next 25 years and kept the interest rate at 2.75 percent. The total after 25 years could be $14.5 million, including interest.
The projections outlined show that the town could afford the payments of nearly $570,000 every year, but at least one town council member is skeptical about the cost and size of the project.
“There are a lot of buildings with a lot less square footage and a lot more employees,” Council member Tom Schuler said. “I don’t see the logic in spending $10 million on a town hall.”
Town officials have been considering constructing a new facility for about two years. The existing church the town has used since 2003 was built in 1961 at 1100 W. Oak St.
Town manager Ed Mitro said officials considered the possibility of renovating the church, but early estimates showed it would cost $3.5 million and still wouldn’t provide more space. About 25 employees work in the current 27,700-square-foot building.
“We’re out of space in this building,” council member and former Mayor Jeff Papa said, adding that he had no space for an office during his time as mayor. “Rates are at a historic low and if we wait, we’re going to pay more in interest.”
Indianapolis-based CSO Architects has been working on the design of a new town hall since the beginning of 2015. Initial estimates from a year ago showed a new facility would cost $7.5 million for about 38,450 square feet of space. The higher price tag now is for a 44,000 square foot building, but the town does not expect to use all of it immediately.
The front section of the property where town hall sits today—about 3.5 acres—would be sold to a private developer for commercial use. According to a recent appraisal, the front portion of the town hall property is worth just more than $1 million.
The estimated payment schedule for the new town hall does not include projected revenue from the sale of the land or an increase in TIF dollars from new commercial development.
Last year, the town approved creating a new 38-acre TIF district surrounding town hall to capture new tax revenue. It stretches northwest from the municipal building to Quail Run Apartments along Ford Road. The Starbucks just west of the town hall is within it, but the adjacent Boone Village shopping center is not.
Council member Josh Garrett said he trusted the effort that has been put into the project for the past two years and said the town should have room to grow in the future.
“I’d rather do that now then have to go build a new building in 10 years,” Garrett said.