Council Approves Bond Sale For New Fire Station, Downtown Park Redevelopment, Baltimore Avenue Work

Council Approves Bond Sale For New Fire Station, Downtown Park Redevelopment, Baltimore Avenue Work
A rendering of the proposed downtown park redevelopment is pictured.

OCEAN CITY — Despite some misgivings about the price tags on some of the capital projects included, resort officials this week approved on first reading a future bond sale totaling nearly $49 million.

The Mayor and Council had before them on Tuesday the first reading of an ordinance authorizing the sale of general obligation municipal bonds totaling nearly $49 million. The bond sale includes multiple capital projects, including funding for the downtown recreation complex redevelopment, the relocation of the existing firehouse at 74th Street to a new location in front of the Public Safety Building at 65th Street, the next phase of the Baltimore Avenue corridor redevelopment among others.

Also included in the proposed bond sale is the refinancing of bonds issued in 2012 at around $20 million. By taking advantage of historically low interest rates, that $20 million still on the books since 2012 can be refinanced through the currently proposed bond sale, resulting in a savings of nearly $1 million.

Last week, the Mayor and Council got a first look at the design for the new Ocean City Fire Department firehouse and were taken aback by the estimated $11.2 million price tag. When the new firehouse was discussed last spring, the cost estimate was around $5.5 million, of which $1.5 million was expected to be the contribution from the volunteer fire company from proceeds from the sale of the existing firehouse at 74th Street.

Because the estimated cost of the firehouse had escalated, and because the proposed design included a new Station 3 firehouse over two times the size of what was anticipated, the Mayor and Council sent City Engineer Terry McGean, Fire Chief Richie Bowers and fire department staff back to the drawing board to come back with a design closer to the original estimate.

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“We heard the marching orders loud and clear,” said McGean on Tuesday. “My understanding is it will come back to you. Any savings from the firehouse can be applied to the Baltimore Avenue project. The cost of the fire station was estimated at $5.5 million, but it went up substantially. It’s not going to cost that much.”

Nonetheless, the new Station 3 firehouse was still listed in the current potential bond sale at the $11.2 million estimate. Last week, it was discussed at length that the town had no intention of building an $11.2 million firehouse when the original estimate was $5.5 million, but that $11.2 million would be included in the bond sale and any reduction in the cost of building the new fire station could be applied to the Baltimore Avenue project, which is expected to eventually cost around $20 million.

However, Councilman John Gehrig, who was absent from last week’s work session and did not participate in the lengthy debate, on Tuesday questioned why the firehouse was still listed at $11.2 million in the proposed bond sale.

“I’m just not comfortable with this,” he said. “I don’t want it to come back that we voted on all of these numbers. It looks like we’re approving an $11.2 million firehouse. I’m fine with the actual bond amount. I just don’t know why we’re voting on something with so many questions.”

Finance Director Chuck Bireley explained the specific amounts for the individual capital projects listed in the bond sale were essentially placeholders and once the sale is completed, the town can move funds around within the bond based on needs for the various projects. In other words, if the new firehouse design comes back in at $7 million, the $4 million in savings can be applied to Baltimore Avenue, for example.

“You can approve the $48 million bond sale without specifically identifying the estimated costs for these projects,” he said. “You can include the projects, but you don’t necessarily need the itemized costs estimates for each of them.”

Council President Matt James explained it further.

“We’re not held accountable for each of those numbers,” he said. “These are just allocations, or placeholders.”

James said when McGean and Bowers come back with an amended cost estimate for the new firehouse, the funds earmarked for the fire station in the bond sale can be applied to other capital projects listed.

“When they come back and the firehouse is say, $7 million, we can apply the extra $3 million or so to the implementation of the Baltimore Avenue project,” he said.

Gehrig, however, could not be dissuaded. He continued to assert that, at least on paper, the bond sale as proposed appeared as though the Mayor and Council were signing off on an $11.2 million firehouse.

“This makes no sense,” he said. “We’re putting a number on a firehouse we know we’re never going to build at that cost. We’re voting on something we’re going to do in the future.”

When asked if the goal was to take advantage of low interest rates, why wasn’t the entire Baltimore Avenue corridor funding included in the bond sale, Council Secretary Tony DeLuca explained the Baltimore Avenue project was just in the design phase and additional funding would come in future bond sales.

“The conceptual estimate for Baltimore Avenue is $20 million,” he said. “The reason we didn’t include that entire amount in this bond sale is because the design isn’t complete. Any overages for these other projects can be applied to Baltimore Avenue. The message was clear last week. We’re not building an $11 million firehouse.”

oc-park-150x150.jpgCouncilman Peter Buas said reworking the design of the new Station 3 firehouse would result in savings that could be applied elsewhere. In addition, the downtown recreation complex is listed in the bond at $4.6 million, but the town is likely eligible for federal and state grants, which would also bring the cost of that project down.

“There are really only two variables in this,” he said. “One is the reduction in the estimate for the firehouse. The other is the potential grants for the downtown recreation complex, which we’re not even sure if we’re going to get.”

Nonetheless, Gehrig said he couldn’t support the bond sale ordinance with the firehouse still listed at $11.2 million.

“As a group, do we have a maximum number for the firehouse?” he said. “I don’t want to put a blanket high number on something we’re not going to do.”

James said he shared similar concerns when he first reviewed the bond sale and the cost estimates associated with each of the projects listed, but those concerns were allayed when he learned funds could be shifted around to the other projects listed once the bond sale was complete.

“It gave me great comfort that we can move the money around in this bond issuance for the different projects,” he said. “It gives us some flexibility.”

In the end, the council voted 6-1 with Gehrig opposed to approve on first reading the nearly $49 million bond sale as proposed. Again, about $20 million of the proposed bond sale will go to refinancing existing 2012 bonds at a lower interest rate, resulting in savings of around $1 million. The remaining amount will go to the various capital project listed in the bond.

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.