Public-private partnership poses risks, rewards in development of new building

FILE PHOTO - The Clackamas County Courthouse in Oregon City has become increasingly deficient in terms of capacity and safety, prompting the question before the board of county commissioners whether to replace it or not. Clackamas County has reached an important crossroads in its approach to constructing a new courthouse to replace the increasingly deficient 1936 building in downtown Oregon City.

County commissioners on Wednesday, April 21, dove head first into a discussion over whether to continue pursuing the route of a public-private partnership — which the the previous board voted 4-1 to explore last year — or pivot to take the traditional road of a public bidding process. The development of a new courthouse is a topic the county has vetted since it completed the master plan for its Red Soils campus up the hill from downtown Oregon City in 1998. Clackamas County will look to capitalize on approximately $94.5 million in matching funds set aside by the Oregon Legislature for the project, of which $31.5 million is earmarked for design and engineering efforts that were delayed due to both COVID-19 and the 2020 wildfires. The county initially expected the total cost of the project to come in around $189 million, but new funding models show it could end up between $200-300 million.

Courthouse Project Manager Gary Barth was joined by Finance Director Elizabeth Comfort and several outside consultants in helping the board understand the benefits and drawbacks of both the traditional bid process and the public-private partnership (PPP).

A PPP approach would see private developers competing by assembling teams to bid on the design, financing, operation and maintenance of the new courthouse over the life of a 30-year contract with the county. The county wouldn't begin making payments on the new building until it's completed in 2025, giving itself time to lay the foundation for how it will finance those payments moving forward. It could also absolve the county of much of the financial risk associated with the development, but the total cost of the project could potentially be higher — a facet of the conversation which Commissioner Paul Savas felt was a sticking point.

"It's a $200 million project. We have a choice of adding another $100 million of cost under the PPP scenario versus the traditional scenario" Savas said.

County Chair Tootie Smith challenged Savas' math on that, saying that if the county is able to find a way to pay less on interest over time, it could bring the cost of the PPP route down.

Smith said she's interested in the PPP approach because the county needs a building that will "last the test of time" and bring down the county's cost on maintenance.

"I'm not convinced that the conventional way to build is going to save any money," Smith said. COURTESY OF CLACKAMAS COUNTY - A slide from Wednesday's board meeting shows the pros and cons of the two development processes.

Smith has been a vocal critic of plans to build a new courthouse in the past, even going so far as to suggest that the courthouse could be housed in a renovated block of the Clackamas Town Center shopping mall. But Wednesday she seemed cautiously interested in the idea of using the PPP if it ends up penciling out financially. She also requested several numbers and pieces of information be brought back to the board to help inform their decision.

Commissioner Sonya Fischer said her interest in the PPP method is that it brings in experts who have done this kind of work before and specialize in the field of developing courthouses. Consultants who presented Wednesday drew comparisons to other projects they've either studied or personally worked on in locations such as Miami-Dade County, Florida — which just broke ground on a $267 million courthouse — and Howard County, Maryland, just outside of Baltimore.

Commissioner Martha Schrader said that in her mind she views the conventional delivery system of developing the new courthouse coming with extreme financial discipline moving forward, meaning that cutbacks would need to be made in other areas.

"That's the trade off that we're going to be talking about," Schrader said. "PPP seems to buy us time, frankly, what I like about it is I don't want to have a Wapato because that was built and then there was no operation and maintenance money, and that's pretty significant. To me, transferring the risk of the operation and maintenance might be worth looking at."

The board is expected to consider the information they received in the two-hour study session over the next two weeks before coming back to make a decision on what path to take on Tuesday, May 4.

According to Smith, there are three questions currently before the board in regards to the courthouse: Does the board want a new courthouse or not? Can the county afford it? And, if so, by what mechanism will the board pursue the development?

Smith said no matter what route the county takes, this project would mean extreme fiscal responsibility moving forward, not only for current county commissioners, but all those who follow.

"We have a decision to make: We can build a building and set aside money in our current budget to do that. We can set aside maintenance for existing buildings and take care of what we own, or we can continue to be tempted by every person that walks in the room, 'Oh I need this, I need this program because woe is me,'" she said. "I will say this to commissioners: You can't afford to do everything, all the time, all at once."

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