Who's Got the Bucks?

My B.S. detector went off twice while reading a story in the June 13 issue of the monopoly daily paper about the proposal to purchase One Technology Center (OTC), 100 S. Cincinnati, to house City Hall.

First alarm: Mayor Kathy Taylor was quoted as saying, "The City is at a crossroads. We either have the ability and positive attitude to leap forward substantially or totally miss it and fall further than we have fallen before."

Second alarm: Economic Development Director Don Himelfarb "said he wants to combat those people who will say that 'this is a project that the mayor wanted and she's going to do whatever it takes to make it happen, or someone's lining someone's pocket, or whatever the idiots out there spout.'"

Here we have two classic examples of using emotional appeals to distract from an objective evaluation of the costs and benefits of the proposal.

In the first case, the Mayor makes extravagant claims about the impact of the decision. It's no longer a mere business decision but a choice between a golden future and decay and stagnation. Why, we all want to be on the side of the golden future, don't we?

In the second case, Himelfarb takes a page out of the Mayor's own book. During her campaign for mayor, when she was confronted with evidence that she had voted in both Oklahoma (in person) and Florida (by absentee ballot) in the 2000 presidential election, she didn't deal with the evidence, but questioned the sanity of the questioner. ("That is crazy.") It was only after she could confirm that the physical records which were the source for the electronic evidence had been routinely destroyed that she denied having voted twice in the same election.

Himelfarb's characterization of skeptics as spouting idiots made me wonder if there was something in the pros and cons that he doesn't want to have brought to light. It makes me wonder if the very things he dismisses as crazy talk might have some basis in fact.

If moving City Hall to One Technology Center is such a good deal for Tulsa taxpayers, the facts should speak for themselves. Insults and delusions of grandeur shouldn't be required.

There are plenty of subjective reasons to like the idea of moving City Hall. The old building is ugly and sits in the middle of an ugly plaza. It was constructed in view of the projected needs of the City of Tulsa in 1985. The new location puts City Hall at the crossroads of streets that tie directly to the expressway system. It also puts City Hall closer to the center of new development activity on the east side of downtown. The newer building ought to be more energy-efficient.

None of that changes the fact that the move will cost $67.1 million, of which (according to the daily paper) $52.25 million is the purchase price of the building. That money has to come from somewhere, and we've already been told that the City budget won't allow for a net increase in the number of police officers, repairing and opening more pools than last summer, or operating the golf courses, even with an increase in utility rates.

To the credit of the Staubach Company, the consultants on this due diligence process, they haven't tried to offset the acquisition costs with potential earnings from the sale of City properties or possible increased sales, property, and hotel tax revenues from private development replacing City facilities. Still, they do assume that the current tenants of OTC (Level 3 and Deloitte Touche) will want to stay and that they'll continue to generate the same amount of rental income.

(Staubach's Powerpoint presentation on the OTC purchase can be found linked at http://www.cityoftulsa.org/OurCity/Mayor/OneTech.asp -- click on "One Technology Center Report.")

The City will have to be very careful about its choice of tenants. City contractors like the Tulsa Metro Chamber and Downtown Tulsa Unlimited (through its affiliate Tulcenter Inc.) should be ruled out right off the bat. The City needs to have the freedom to terminate or curtail contracts with such entities without worrying whether they might retaliate by moving out and taking their lease payments with them.

For similar reasons, the City should exclude architectural firms, land use attorneys, surveyors and civil engineering firms, general contractors -- any company connected with the development industry and therefore dependent on the City's administrative and legislative land use decisions.

The only appropriate tenants are those whose sole concern is that the City should be a good landlord.

In all the material that has been publicly released, there doesn't seem to be anything that says how the City will pay for the new building. It's one thing to claim, as the Staubauch report does, that moving to OTC will save the City $15.2 million over the first 10 years. That claim assumes operating costs to go up at a certain rate and that the City would have to fund $12 million in deferred maintenance costs that are currently unfunded.

(One of the charts that illustrates the asserted savings is a year-by-year graph comparing the costs of different scenarios. The first year estimate that the OTC option will cost less than $2 million vs. about $5 million for the status quo is clearly erroneous. The move to OTC has to be more expensive in year 1 than staying put because the City will be paying duplicate operating costs and additional one-time moving costs. One also has to wonder about the straight line on the graph estimating the cost of the status quo. Surely a thorough accounting of projected capital costs would show some variation from year to year.)

Since we don't have $67.1 million just sitting around, the money will have to be borrowed and the City (or more precisely, a City-controlled trust) will have to make payments on that debt, in addition to the operating costs. Some of that will be offset by lease payments from tenants, but surely not all of it.

Municipal finance isn't like private finance. There are different sources of revenue, different buckets of money, and very strict rules on what can be done with the money in each bucket. A complete plan to purchase OTC has to include which sources of municipal funds will be used and specifically the impact on the City's general fund.

While the Staubach report might be sufficient for a private company to make a purchase decision, City decision makers need some information that it doesn't appear to provide.

Expecting that information before coming to a decision doesn't make anyone a Neanderthal or an idiot.