GILROY
– City and police officials say the $1.1 million gap between
what Gilroy’s new police station will cost and what City Hall had
budgeted for won’t be difficult to close.
GILROY – City and police officials say the $1.1 million gap between what Gilroy’s new police station will cost and what City Hall had budgeted for won’t be difficult to close.
A combination of “rainy day” reserve funds and nominally increased developers impact fees will make up the difference between the $27.9 million cost of the new station and the $26.8 million the city has set aside to pay for it.
“We have enough money in our reserves to cover the difference over the short term,” City Administrator Jay Baksa said.
To cover the difference over the long term, developers fees will likely increase, but not by much, Baksa said. The city is still weeks away from finishing a study – called a nexus study – to determine how much developers must pay in impact fees in the future.
“I won’t know how much the impact fees will be until the nexus study is complete,” Baksa said.
Developers impact fees are a typical fund-raising tool for cities. In theory, the money generated in impact fees covers the cost of new facilities and services brought upon by growth. For instance, as more people move to Gilroy, there is a need for more parks facilities and recreation services.
The increased impact fees likely will be unpopular with developers. After reviewing a challenge by the developer-friendly Home Builders Association of Northern California two years ago, the city decided to revamp its impact fees.
Last summer the city issued roughly $40 million in municipal bonds to cover the cost of the police station design and construction, as well as the construction of a new sports complex and fire station, among other things. That money is now collecting interest and will be used to pay off what the city will soon owe to architects and builders of those projects.
“The good news is there’s a little bit of a revenue coming in from that, but it’s not substantial,” Baksa said.
For GPD Assistant Police Chief Lanny Brown, there’s other potentially good news, too. Brown says there is a chance that when the project is put out for bid in June, builders will bid less than $27.9 million.
“It’s not a blind hope, it’s a calculated hope,” Brown said. “We’ve been projecting costs at the high end of the scale because that seems like the safe thing to do.”
Recent calculations the city and its consultant made on the price of steel catapulted the police station cost more than $1 million.
According to consultant Bill Little, China is buying steel and raw materials in quantities that are jolting the international market and other countries are responding with their own “buying frenzies.”
As a result, Little said, the price of structural steel has jumped more than 31 percent in the past four months. Reinforced steel has gone up even more – 61 percent. Little said he’s looked at suppliers all over the country, and the story is the same.
Staff writer Peter Crowley contributed to this report.
