Council to pick firm to build police headquarters

FRONT ROYAL – Town homeowners can expect to see their tax bills go up to pay for a new police department headquarters.

The Town Council plans to vote to award a contract to Dustin Construction – the apparent low bidder – to build the police department facility on land off Kendrick Lane. Dustin Construction, based in Ijamsville, Maryland, submitted a bid offering to build the project for $7.73 million. Dustin’s bid still came in roughly $800,000 higher than expected, Town Manager Joseph Waltz told council at a work session on Monday.

The total cost comes closer to $9.5 million as estimated by Moseley Architects, the firm hired by the town to design the project. The amount reflects “value engineering” or reductions made to the design to save money. The value engineering could only go so far before the reductions hit “mission-critical” areas of the project such as an emergency generator that must remain in the design, Waltz said.

The town intends to use the New Market Tax Credits program when it borrows the money for the project to help save on the overall cost. Finance Director B.J. Wilson said the town has allocated $444,986 through real estate tax collections to help cover the cost of the project.

Vice Mayor Eugene Tewalt reiterated his concerns with the steadily increasing cost of the headquarters and how the town intends to pay for the project. Tewalt said town residents likely would protest a tax increase to cover the project cost.

“I mean we can’t afford $10 million,” Tewalt said. “I don’t think we’re looking out for our constituents when we’re considering a $10 million building.”

The town could gradually increase the tax rate from the current levy of 13.5 cents per $100 of assessed value by 3 to 4 cents over a number of years, Wilson explained.

Councilman William Sealock Jr. said he would like to see how a phased plan for construction would affect the cost of the project. Waltz said the phased approached didn’t seem to work for this project but he and the designers could revisit that idea.

Information provided by town officials shows that Front Royal would make interest-only payments of $165,000 on an $11 million loan for at least the first seven years under the New Market Tax Credits program. The town then would make annual payments of $525,950 each year to repay the debt. Without the tax credits, the town would expect to spend $15.13 million including interest by the time it repays the $11 million loan.

Tewalt voiced skepticism over the program.

“We’re not even sure the tax credits are gonna be there in seven years,” Tewalt said.

“That is correct,” Wilson said.

“I don’t like to live on dreams,” Tewalt added.

The council approved a resolution at its Aug. 8 meeting to participate in the New Market Tax Credit Program that allowed $9 million for the construction of the headquarters. The Front Royal-Warren County Economic Development Authority can allow up to $12 million for the project if council approves a revised resolution.

The town staff has recommended that the council approve a revised resolution, award the construction contract to Dustin and consider increasing the real estate tax rate in small increments over a period of years to accommodate the additional money needed to repay the debt as a result of the tax credit program. Staff has recommended that the council consider increasing the tax rate by one half-cent each year. The owner of property assessed at $200,000 would see the tax bill increase by $10 per year under this scenario.

The town increased the real estate tax rate 2 cents per $100 of assessed value beginning in fiscal 2012 to raise revenue to  help cover the cost of several projects including the new police headquarters. The town allocated an additional 1 cent of the real estate tax rate to the headquarters beginning in fiscal 2015 that provided another $112,500 toward the project for a total allocation of $187,500. The town increased the tax rate by a half-cent per $100 of assessed value in fiscal 2017.