City Hall’s Opportunity Cost

Opportunity cost is the cost of any activity measured in terms of the best alternative forgone.

Remember economics class in college? It was about the second week of ECON 101 when most folks started to nod off. It was also when my professor began to teach the concept of opportunity cost. I’m sure this discussion of Alpharetta’s opportunity cost will be equally as boring.

The City of Alpharetta is going to ask residents to borrow $29 million to fund the downtown plans. Unfortunately at this time more granular figures are not available such as the actual cost of the city hall building or the parking deck. Perhaps this study is a bit premature but I’m going to go with it. Let’s first start with the borrowing.

$29 Million in Bonds

Mayor Arthur Letchas was quoted in the AJC saying, “Alpharetta residents can make this vision happen without paying a dime more in taxes than they do today.” This is a true statement… sort of. The city collects $6.5 million per year to service bond debt. Next year’s debt service would only cost $2.1 million. Yet if the city doesn’t borrow, millage rates for debt service could be reduced. So yes, the mayor isn’t raising your property tax, but he also isn’t lowering it.

What Will $29 Million Buy?

Let’s suppose that instead of a new downtown and city hall, Alpharetta decided to spend $29 million somewhere else. What could that buy? Back in March the city submitted a wish list of road improvement projects to the Atlanta Roundtable for consideration under the Transportation Investment Act. Let’s go shopping on this list! For $19 million the city could widen Rucker Road and add bike lanes and landscaping. Or how about Kimball Bridge? $21 million will widen this road. Do you enjoy the greenway? $11 million will take it north to the Forsyth County line. There are some smaller ticket items on this list as well. My point is that there is an opportunity cost to spending all the money downtown.

City Hall

Again, it is tough at this point to pin a cost on city hall itself. Given the total downtown pricetag of $29 million, my gut feeling is that Alpharetta is overpaying for the city hall building. In 2001 the City of Cumming spent just $5 million on a 45,000 square foot city hall. It far exceeded their needs at the time. Adjusted for inflation, that number probably would be closer to $8 million today. In 2007 Duluth spent $13 million for a glitzy new 43,000 square foot city hall. Alpharetta wants a 47,000 square foot building.

And for what it’s worth… Milton and Johns Creek still don’t have city hall buildings. Both are operating out of leased space in cubicle land. I’m sure it sucks writing rent checks though. My point is that these cities have very unglamorous city halls yet they still manage to keep their cities running.

I’m not advocating against a new city hall as Alpharetta does indeed need a new one. Let’s just keep things in perspective here.

Parking Deck

Again, we don’t yet know the cost of this. The deck will have 450 parking spaces. I asked Councilman Chris Owens how much land would be required to build a 450-space parking lot. It was a rough estimate so don’t hold him to this, but he estimated about four or five acres. It will be interesting to see the justification of the parking deck knowing this. Killing the deck would reduce a lot of green space but has the potential to shave millions off the overall cost. Would residents rather see this money spent on another park elsewhere in the city? It’s opportunity cost.

So there you have it. I’m sure we could do more once actual figures are available for the individual components of the plan. And don’t get me wrong, I’m not opposed to the plan. Technically I’m a Forsyth resident so I’m not paying for this, right? I just think Alpharetta voters need to consider the potential opportunities they’ll pass up. The city needs to do something about downtown and city hall, I just don’t think they need to spend all $29 million downtown. The best solution is somewhere in the middle. I’d start with a more reasonable city hall and debate the necessity of a parking deck. Residents might have the possibility of a new downtown AND a small tax cut. Or how about a downtown AND a new road or park.

6 Responses to “City Hall’s Opportunity Cost”

  1. Kim May 25, 2011 at 11:43 am #

    Well stated.

    What are the goals? Bringing vitality to downtown? I am all for that. It is long overdue, but I need more clarity than the details we have right now. I want to know cost breakdown and if there are other more modest options. What are the options for the “future development” blocks? Can we get it in writing?

    We’ve been debating a kitchen remodel for quite awhile. Opportunity cost is what has held us back. I suspect that many individual households are carefully weighing their home improvement opportunity costs in this fragile economy.

    We need to apply those same principles to our city expenditures.

    If I knew lots of other people were paying for my kitchen, I would go for the ultimate kitchen remodel because it is always easier to spend other people’s money.

    P.S. Interesting info on the cost of the Duluth City Hall. We should not need anything more ostentatious than that.

  2. Lee May 25, 2011 at 4:54 pm #

    Thanks Kim.

    I may be a bit premature on this analysis. The more I read and talk to folks about the downtown plans the more I realize that this is very much in the early stages. Basically the city is saying “we have this much land and can spend $29 million. We want green space, city hall, a library and stores.” That’s pretty much it. I hope there is a lot more color added to the picture before November’s vote.

    Nevertheless, I don’t think Alpharetta needs to blow the entire $29 million wad of cash downtown.

  3. Kim May 25, 2011 at 5:20 pm #

    Lee, thanks for the clarification. I guess you can tell I am a bit jaded. It is just that our community has had so much thrust upon us against our will that it is hard to trust anymore, KWIM?

  4. GA Jim May 26, 2011 at 11:46 am #

    Great points Lee. I look forward to seeing what the actual numbers and details are once the city makes them available.

    Doesn’t it seem odd that the city would jump the gun and release pretty pictures of an idea without having any data to support their proposal? How could city council even propose something without knowing the details?

  5. Mike May 26, 2011 at 10:12 pm #

    Because — as Lee has wisely acknowledged above — we are very early in the public input process.

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  1. Roots in Alpharetta » Libraries or E-book Readers? - July 25, 2011

    [...] I attempted to do this with the $29 million downtown pricetag back in May when I wrote about city hall’s opportunity cost. We’re talking about significant chunks of money with Alpharetta’s downtown [...]

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