Local

Building Wealth?

Medford Mail Tribune | April 29, 2013 4:36 p.m. | Updated: April 29, 2013 11:36 p.m.

Rumblings about closing libraries and laying off sheriff’s deputies stand in stark contrast to Jackson County’s ambitious building campaign capped by a $28 million health services complex that will be built this year.

County officials say the new construction will ultimately generate more revenue, but the darkening financial outlook has taken some residents by surprise.

Medford resident Robert Soltz said the county’s difficulties are at odds with officials’ boasting several years ago about how well they were doing during the economic downturn.

“They gave themselves all a pat on the back,” 53-year-old Soltz said. “They took their raises. Now we’re on the short list of counties that might go bankrupt in the state.”

The county decided to invest $38 million of its rainy-day fund into $53 million worth of building projects, including the new health services building and expansion of the jail. Ultimately, the county hopes to generate an additional $2 million to $3 million annually from lease arrangements on those two buildings.

The money will partially offset a shortfall, which has grown to $7 million, that threatens libraries, the Sheriff’s Department, the Jackson County Fair, the Extension Center and other services.

County officials say they consider the building projects long-term investments, but Soltz said he questions the county using what he considers emergency funds to buy and develop properties.

The county had $75 million in its rainy-day fund five years ago and expected it to reach $100 million. At the time, interest rates were about 5 percent, which would have raised $5 million annually in revenues, almost offsetting the shortfall.

But interest rates plunged, thwarting plans for a long-term investment from annual interest payments.

In addition, the county was slammed by sharp increases in the Public Employees Retirement System, while revenues for some fees and services dropped and property taxes declined. Timber payments received from the U.S. government have dwindled since the last big payment of $23 million in 2007, though other, smaller payments have come in.

The $36 million general fund — the portion of the county budget over which commissioners have the most flexibility in how it’s spent — has dropped by $27 million over the years.

During the past seven years, the county has reduced its full-time staff from 1,075 to 836.

Between paying for operating expenses and the building projects, total reserves have been reduced to $25.8 million in the 2013-14 budget, of which $13.8 million is the rainy-day fund.

A 2012 audit by the Secretary of State’s Office identified eight counties buckling under financial pressures. The counties are Coos, Curry, Douglas, Jackson, Josephine, Klamath, Lane and Polk. The state considers Jackson County in the best financial shape of the eight and noted the county could resolve most of its problems by closing libraries.

Soltz, who was an accountant before he retired, said he has no problems with the county undertaking building projects as long as it’s not siphoning money away from libraries and law enforcement.

He said he views the rainy-day fund as an emergency account, not as a building fund.

Soltz said he finds it questionable that the county purchased lots across from the Elections Center on West Main Street that are now just a field of weeds. The county purchased the property for almost $700,000 in 2010.

He said the county spent $2 million for the post office lot, where the new health services building will be, but now the most valuable piece of the property — the building — is being torn down.

County officials hired ORW Architects to look for potential sites for the health services building and prepare preliminary designs toward the end of 2009. After reviewing five locations, including the West Main lots, the county couldn’t find a property that met its criteria for a site that would be close to the population center, provide a better level of service, include access to mass transportation and be in close proximity to other government agencies, according to County Administrator Danny Jordan.

When a “for sale” sign went up on the post office building, the county toured the facility on April 13, 2010. After consulting with architects, the county deemed the building suitable for remodeling because it could consolidate all services under one roof.

The county used rainy-day funds to purchase the 2.2-acre property on Sept. 16, 2011, for $1.9 million. It was leased back to the U.S. Postal Service for $150,000, resulting in a net purchase price of $1.75 million. The Jackson County Assessor pegged the real market value of the property in 2011 at $1.8 million, with the building alone worth almost $1.5 million.

After the architect and the contractor, JE Dunn Construction Co. of Portland, worked on the design, the county determined that it would cost $1 million less to tear the building down and start from scratch.

The construction budget was set at $18 million for the building and $8.2 million for an adjacent six-story parking garage.

The Health and Human Services Department provided the majority of the funding for the project — $15.5 million taken from its reserves — and the rest was drawn from the rainy-day fund.

Jordan said the health services department would pay the county lease payments on the new building, essentially freeing up state and federal dollars that can be put back into the general fund.

“This would allow the county to generate ongoing operating revenue — revenue we do use to support services and staff — where it didn’t previously exist,” Jordan said.

The county owns other buildings on East Main Street that are used by health services, and these buildings could either be sold or leased to generate additional revenues.

County Commissioner Don Skundrick said the residents of Jackson County have expected the county to run its operations like a business.

The county expects the airport, the fair and the parks to generate enough revenues to be self-sustaining because they fall into a category referred to as “enterprise zones.”

Other operations, such as the Sheriff’s Department and libraries, can’t be run like a business, so the county is left with finding other solutions to pay its bills.

“The county is acting somewhat like a business,” he said. “We’re trying to be innovative.”

Skundrick noted that he hasn’t taken a raise and his base salary without benefits remains at $93,000.

Leveraging rainy-day dollars to get grants and other revenues has helped the county build the 911 center and other building projects, Skundrick said.

Turning building projects such as the jail expansion and health services building into long-term sources of revenue from lease payments is one of many creative undertakings, he said.

At the same time, the new buildings have improved the efficiency of facilities the county has for its residents. The 911 center was moved from the Jackson County Courthouse, which could collapse in a major earthquake, to a state-of-the-art building near the airport where it can continue to operate during a major emergency, he said.

Despite its best efforts to raise revenues, the county still fell short, prompting Skundrick to propose a $2 to $10 a month surcharge on property owners.

Medford resident Mike Hilmer said he’s opposed to Skundrick’s proposal.

“I just hate to see a new tax enacted because they never go away,” the 63-year-old said. “At least I give Don some courage for suggesting it.”

Despite his objections, Hilmer said he understands that the county does a lot of good things for its residents, and he couldn’t think of any program that could be cut.

He said he would like more information on the county’s budget situation before he completely makes up his mind about the surcharge.

“I do want the county to do well,” he said. “I appreciate what it does for the majority of people.”

Reach reporter Damian Mann at 541-776-4476 or email dmann@mailtribune.com.

This story originally appeared in Medford Mail Tribune.

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