Show Us the Money: Cecil County to Juggle Bonds to Buy Sheriff’s Building, Other Projects

October 7, 2015

The Cecil County Executive wants to spend $7.3 million to buy a building in Elkton where the Sheriff’s Department and emergency dispatchers currently rent office space under a proposal presented to the County Council on Tuesday. County officials claimed the plan would more than pay for itself in the long run and juggling the county’s bond accounts would cover the immediate costs.

The county recently learned that the building and land at 107 Chesapeake Blvd. that currently houses the Sheriff’s Department offices and the Department of Emergency Services, including 911 emergency communications and dispatch operations, was listed for sale. The property is located in the Upper Chesapeake Corporate Center, which was long ago designated as a special tax break zone designed to attract new business and employers to the county. The county administration building is also located in the center, a short distance down Chesapeake Blvd. from the Sheriff’s Office site.

The lease arrangements for the Sheriff’s building have long been criticized by many county residents for its basic costs and annual automatic escalator clauses that boosted expenses to the county each year of the 20-year lease that began in 2005. Winston Robinson, the county Director of Finance, told reporters that the lease included “build-out costs” instead of calculating the up-front expenses separately, so it “wasn’t really as bad as it looked.” But the county will save about $7 million by buying the property, instead of continuing the lease, and will also get long-term revenues from rents paid by other tenants of the building, Robinson added.

While there may be a substantive policy question about the appropriateness of the county government becoming a landlord for private businesses and assuming the costs of maintaining space occupied by those tenants, County Council members focused on the potential cost savings outlined by county officials.

“I think this is an excellent investment by the county,” Councilor Dan Schneckenburger (R-3) said at the council’s evening legislative meeting. “We’re very fortunate the building is up for sale and we have the resources to acquire it.”

The county would obtain the “resources” by juggling its Capital Improvement Project bond funds, as part of a broader initiative by Robinson to re-allocate bond funds from delayed projects and shift money to new initiatives such as the purchase of the Sheriff’s office building. He would create a whole new category in the CIP dubbed the “property management enterprise fund” that includes just the 107 Chesapeake Blvd. property.

The juggling act raises broader questions about when the piper will be paid for projects that were previously allocated bond funds that would now be re-directed to new initiatives such as the Sheriff’s building purchase, road work and sewer project costs. When the stalled projects get back on track, the county will have to replace the money with new bond issues or other revenues.

For the Sheriff’s building, the current year’s rent paid by the county is $400,000 and was projected to rise to about $480,000 next year. There are about ten years remaining on the lease, with annual costs due to rise each year under the automatic escalator clause.

State property records show the 107 Chesapeake Blvd. property ownership passing through a series of Limited Liability Corporations (LLC’s), a type of business entity whose owner/members are difficult to trace through public records. In 2002, the William F. Burkeley LLC sold the property for $400,000 to Upper Chesapeake Flex One LLC which subsequently sold the site on 7/21/12 for $6.1 million to the current owner, Red Leaf-Chesapeake LLC, which lists a Towson post office box as its address. All the transactions were listed as “non-arms length” which generally means there is a business relationship between the buyer and seller, such as overlapping partners or investors in the LLC’s.

The site is valued for property tax purposes by the state of Maryland at $5.58 million, with most of the value attributable to the 4.9 acres of land. The building itself is valued at just $490,600 and includes about 55,000 square feet of what is described as “industrial flex space.”

Al Wein, the county’s director of administration, told the Council at its evening legislative meeting that two real estate appraisers evaluated the proposed purchase price and concluded the $7.3 million figure was appropriate. The county would pay the costs via 20 year bonds, he said, and the bond costs, county rent savings and income from the other tenants would yield a net savings of $7 million over 20 years. After the bonds were paid off, Wein said the county would have income of $470,000 a year from rents.

The county currently leases 27,250 square feet of space in the building, Wein said. One office space area is currently vacant and could provide room for future expansion of the Sheriff’s Office and emergency services operations at the site.

Robinson also presented to the Council a plan for revising the CIP and related bond sales that re-allocates money from old bond issues to new projects or delays some previously planned projects that are not moving ahead as scheduled. He also wants to go to the bond markets earlier in 2016—January instead of March or April—to get more favorable interest rates in case the Federal Reserve finally carries out its warning that it will take steps to boost interest rates as the economy improves.

While Robinson’s bond shopping list tallies $37,178,800 that the county will borrow in January, that figure is actually less than the $37,960,800 that the current budget had anticipated. Even with new borrowing for the Sheriff’s building purchase and added proposed costs for two sewer projects, the lower figure was achieved by postponing or re-allocation of bond funds from other projects.

It remains to be seen if this strategy is just kicking the can down the road, adding a total of $9.4 million in new spending projects to the county’s obligations now and leaving it to another day to come up with the money and bond funds to cover costs of the previously committed projects in the future.

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One Response to Show Us the Money: Cecil County to Juggle Bonds to Buy Sheriff’s Building, Other Projects

  1. Harold McCanick on October 7, 2015 at 5:37 pm

    I noticed on the audio the council went into closed session to “”discuss” this matter. Apparently there is something they don’t want we the people to know. This was after admitting $1.4 million dollars of “snaffoos”. Watch my hands Bullwinkle!

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