Clackamas County mulls private partner to build courthouse
Clackamas County is one step closer to engaging in a public-private partnership to replace its aging courthouse.
The county's board of commissioners approved by 4-1 vote Tuesday, July 7, to enter into phase one of the project using a relatively new approach to developing critical infrastructure that would see a private developer assume risk and responsibility for the building's continued maintenance for 30 years. It would allow the county to pursue the project relatively soon with little upfront cost to itself for the first 10 years or so. However, the deal could end up costing taxpayers more in the long run with as much as 4% interest in financing costs. According to the county's estimates, these capital costs could be somewhere between an extra $8.9 million and $11 million per year beginning in 2029 and extending through the life of the 30-year contract.
Commissioners have the option to ditch this plan should they not like what's presented by the advisory team they hire when it comes back for discussion in December.
Clackamas County's existing 1936 courthouse in Oregon City was built for the county's 50,000 residents. Today Clackamas County is home to more than 420,000 people. Following more than 80 years of patchwork upgrades to meet growing safety and capacity demands, the courthouse has become functionally obsolete, with critical improvements needed which can no longer be met by this historic public building.
"The need for a new county courthouse is clear. The current facility is no longer serving its function," said Gary Schmidt, county administrator. "The public-private partnership model has been reviewed by the board of commissioners for several months and is one way to fund the project which commissioners and staff believes is a responsible use of public dollars."
The development process approved for phase one of the project by the board Tuesday would seek requests for proposals from a third-party "technical advisory" team. Once hired, this team will assist county staff in drafting partial design and construction documents, financing terms and operations and maintenance agreements for the new facility that will be used to identify the best potential private development partners interested in the project. The county will put out an "expression of interest" request first to garner attention from private developers in order to build a pool to select from once the final request for proposal is approved by the county's board of commissioners in December.
Within the packet linked to Tuesday's county commissioners meeting, the approach listed a series of positive aspects of this method including it being the lowest-cost approach to determining building design and projected construction costs. It stated that private-sector competition will drive facility design and cost.
Other pros include: design and construction work would be contracted by, coordinated with and overseen by the private developer; a higher probability of project being completed on-time and at or under budget; project timeline and cost risk is transferred from the county to the private developer; long-term, lifecycle costs are included providing budget predictability and certainty; design and construction integrated with operations and maintenance to deliver lowest overall lifecycle costs.
Listed under cons: this is a new and relatively untested approach to courthouse development in Oregon, as well as the potential downside of higher life-cycle costs for the facility over the course of the 30-year contract.
According to project director Gary Barth, the county currently has a cost estimate of about $189 million, which does not include the development of any space for the Clackamas County District Attorney's Office. Barth told county commissioners that the state of Oregon is prepared to cover approximately $94 million. $31.5 million of that is already budgeted within the state's courthouse construction fund for the 2019-21 biennium. The other $63 million will be made available by a request during the next full legislative session in the spring of 2021.
"We're going to come back with a lower price tag than 189 million for the courthouse based on what we can afford, and the state will provide that 50% match," Barth said, "most likely something under the ceiling of $94.5 that's already been set."
Commissioner Ken Humberston said that he favored the public-private partnership approach because it answers lingering questions about the continued maintenance of the building, which under this option would fall under the private developer's responsibility for a period of 30 years. It also provides the county the opportunity to move forward with the project now despite not having the financial bandwidth to do so.
Commissioner Paul Savas was the lone "no" vote against the public-private partnership approach. According to Savas, he's not necessarily against the idea of the public-private partnership itself, it's about those added financial costs of the interest taxpayers will have to pay once it begins seeing cost after the first eight to 10 years.
"I think this situation is highly unique because it's really about our ability to service the debt in the first 10 years once we defease debt from the existing buildings to free up the general fund," Savas told Pamplin Media Group. "Our pocketbooks are tight. And my concern is if we have to cut services over the next 30 years to fund this."
Public-private partnerships aren't necessarily a foreign concept in Oregon. They've been used for a number of public infrastructure projects, such as the MAX Red Line in 1997, as well as the redevelopment of several small airports throughout the state. The approach has not, however, been used to develop a new courthouse in Oregon and has only been used in a handful of situations nationwide.
In 2019, Miami-Dade County in Florida — a county of 2.7 million — awarded a $267 million bid to a developer for the construction of its new courthouse through a public-private partnership.
Howard County, Maryland — population 325,700 — broke ground last June on their own new $150 million courthouse project also using a public-private partnership.
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