Not enough money in this tax to pay for promised projects?

Here we go again. Tulsa County Commissioner Fred Perry in this morning's Whirled:

Q: How will additional costs be covered if the projected $282 million price tag for the public projects goes up?

A: As one of nine future "river trustees," if the Oct. 9th river plan/tax vote passes, I have been asked to answer this question. The short answer is that there won't be any additional costs to cover. For one thing, we're told that the engineers factored in some projected inflationary costs. Also, there is a contingency amount of $25 million in the plan. It is doubtful that costs would rise enough to consume that contingency.

Also, the commissioners, prior to passing the resolution, were committed to not exceeding the $282.25, which is in the resolution and on the ballot. There are also protections in the resolution regarding the limit.

In my opinion, and I think the other future trustees will agree, if the costs exceed the estimate and the contingency, something would be dropped off the plan or projects would be scaled down.

Let's compare that with what Perry's predecessor said a month or so before the Vision 2025 sales tax vote. Bob Dick, promised voters that every project would get built:

Dick said the Vision 2025 package also was designed to ensure no project gets left behind due to a lack of funding.

"I think the worst thing you could do is promise you are going to build something and then not have enough money to build it," Dick said.

Vision proponents concede room for error is built into some project cost estimates.

"I don't know specifically what it is really going to cost to build a low-water dam," Dick said.

It looks to me like this plan is set up, just like the low-water dams in promised Vision 2025, to overpromise and underdeliver.

We've been told that the rule of thumb these days is that a county-wide one cent sales tax will raise $100 million per year. A 0.4 cent tax over seven years would raise $40 million x 7 = $280 million -- not quite enough to cover the $282.25 million in total estimated project costs, and no provision whatsoever for fees and interest costs for debt.

I get about the same number -- $280.6 million -- if I take actual county receipts for FY 2007, adjust for the tax rate, assume a growth rate of 2.5%, and figure the numbers out over calendar years 2008 through 2014.

That's right: No provision for finance costs. Since they're telling us the need for pedestrian bridges and low-water dams is too urgent to pay for them on a pay-as-you-go basis, the Tulsa County Commission will once again hire a bond adviser and sell revenue bonds to get the money up front. That means we're borrowing against future sales tax revenues so we can spend the money right away. The designated amount for each project represents the amount of cash needed to build each piece and doesn't include the project's share of fees and interest.

This is why projected sales tax receipts of about $750 million over the life of the Vision 2025 sales tax will be barely enough to pay for $580.5 million worth of projects. According to county financial adviser John Piercey's numbers, combined with PMg's Vision 2025 project report, that $580.5 million will have cost us $674,387,714.81 in sales tax revenues. That's $93.9 million in finance costs.

In Vision 2025, finance costs were not included in the announced project amounts. This is apparent in the way the funds have been managed. If a project's cost was listed as, say, $1 million, the project's sponsor (city, town, university, or non-profit) has $1 million to spend on construction, with no deduction for the project's share of finance costs.

If somehow we got the same effective interest rate, the $25 million contingency amount would be entirely consumed by finance costs, leaving no margin for error should costs increase, and making it quite likely that a few years from now, county commissioners will be telling us once again, "Sorry, but if you want us to finish this project we promised, you'll have to vote for another tax increase."