State's plan to finance Lansing project would increase cost to $111 million
This article originally appeared in the Lansing State Journal on July 10, 2001 at http://www.lsjxtra.com/news/010710HALL1.0.html
By ROBERT SNELL/Lansing State Journal
The new Michigan Supreme Court building will cost $23 million more than originally promised because of the state's slumping economy.
State officials had hoped to pay for the $87.8 million building in cash when they approved the project three years ago.
But the economy has since soured, and the state wants to sell bonds to finance the project - a move that with interest increases the price tag to about $111 million.
The Senate could approve the plan as early as today before legislators break for the summer.
The move would add fresh controversy to what has been labeled the "Taj Mahal" of state construction projects and come as the state finalizes budget cuts.
"That's a difficult decision when we don't have enough dollars to go around," said state Rep. Clarence Phillips, D-Pontiac. "It's not a good way to do business."
Phillips said the move means other construction projects across the state might be curtailed as the state nears its debt limit of $2.5 billion. The state is carrying about $2 billion of debt.
Gov. John Engler and GOP lawmakers say state budgets must be cut to make up for falling revenues, which have left the state with a projected $327 million deficit this year.
Proponents say financing eases the budget slump. And they say the state's AAA credit rating - the highest possible, meaning it can get better deals - and low interest rates contributed to the decision.
A spokeswoman for the state Budget Office said the cost of borrowing the money could be offset by favorable interest rates and using the $87.8 million to fund vital projects such as education.
"We were looking for ways to balance the budget that would be less painful than making sweeping cuts," spokeswoman Kelly Chesney said.
The boom included the new House Office Building, a new building for about 900 Department of Environmental Quality employees, conversion of the former YWCA Building and the refurbishing of the old state library on East Michigan Avenue.
The new facility has its roots in one of the biggest building booms in years as state government sought to consolidate workers.
The consolidation is expected to save $204 million in rent over 25 years, according to the Department of Management and Budget.
The projects represented the most construction since the Victor Building, Grand Tower and Lottery Building were built in the late 1980s and early 1990s.
Workers broke ground on the Hall of Justice in 1999 at the west end of the Capitol Mall. On Monday, work continued on the building's exterior.
Legislators included the Hall of Justice in a $160 million building budget in late 1998. Some senators attacked the project, which included a $15 million underground parking lot. Then-Sen. David Jaye called it a "Taj Mahal."
The latest revelations brought a fresh round of criticism.
"The political class always seems to build itself nice shrines, which underscores where the money is coming from," said Michael LaFaive, a policy analyst with the Mackinac Center for Public Policy in Midland. "Not their own wallets, but ours."
On Monday, one Lansing resident said legislators should have known the economic high times of the late 1990s wouldn't last forever.
"For heaven's sake, that's outrageous," said Ernest Coleman, 69, a retired cook who was walking by the project. "When you're building as big as that, you've got to look ahead."
Cutting the shortfall
The financing plan is one in a series of moves that helped reduce the budget shortfall, financial experts say.
The state also slashed the shortfall by applying about $400 million of the budget surplus and agreeing to finance several other projects across the state. And state departments cut their budgets by about $25 million, Chesney said.
And though the state is nearing its debt limit, there is enough room for emergency construction projects.
"We still have flexibility should there be need to build another project for a university, or if there was a fire," Chesney said.
The state has not sought financing for the Hall of Justice project yet, but experts anticipate an interest rate of 5 percent, according to Tom Saxton, executive director of the State Building Authority.
The financing will work this way: The State Building Authority would sell revenue bonds to pay for the project, paid over as long as 15 to 20 years - or possibly earlier.
The authority would then essentially rent the building to the state - paying about $7.4 million a year, according to the Senate Fiscal Agency.
Penny Griffin, spokeswoman for the Department of Management and Budget, said financing the project frees up the $87.8 million originally earmarked for the Hall of Justice to reduce cutbacks in areas such as education or health care.
"In a tight budget season, we need to find out what the best use of that money is," Griffin said. "We're prioritizing.
"Our priority is that we limit cuts we have to make now. Is it paying for the Hall in full now? No, it's not."
Contact Robert Snell at 377-1052 or email@example.com.
By ROD SANFORD/Lansing State Journal
Price tag increases: Construction continues Monday on the Hall of Justice in Lansing. The state's sagging economy has pushed the cost of the building to $111 million from $87.8 million. The state originally had planned to pay for the facility in cash, but now wants to sell bonds to finance the project.
Size: 281,000 square feet
Cost: About $111 million, including new financing
Date of completion: Fall 2002
Benefits: Reduced travel and mailing costs, elimination of multiple leases, reduction of duplicate services
Tenants: Supreme Court, Court of Appeals, State Court Administrators office and staff, courtrooms, conference rooms, training facilities and cafeteria