Oklahoma Seeks More Debt for Capitol Repairs

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DALLAS – Oklahoma Gov. Mary Fallin wants lawmakers to approve another $120 million of bonds to complete repairs of the state Capitol, even as they struggle with a $910 million budget gap.

If lawmakers approve the bonds in their 2015 session, Fallin expects to finish the project in time for the building's centennial.

"In 2017 we will celebrate with a party this building's 100th birthday," Fallin told lawmakers in her State of the State address Feb. 1. "No one should want to stop construction. This is a legacy opportunity for you all. Let's finish the job right."

The previous $120 million of bonds had to be authorized twice after the Oklahoma Supreme Court struck down the bill that included the debt. The court held that the bonds should not have been included in a bill covering other matters. To avoid such "log-rolling," another bill passed in 2014, and Fallin signed it.

"When I signed this measure, it was widely known that more money would be needed later but we had to start somewhere," Fallin wrote in an opinion piece for the Tulsa World.

"The focus today isn't beautification, but fixing problems — and many of these problems aren't new," she said. "Major infrastructure systems — like the backed-up sewer that sent an overwhelming sewage stench throughout the building as I arrived for the first day of session as a young legislator in 1993 — have needed replacement for decades."

Despite a self-declared "revenue emergency" brought on by a collapse in energy markets, Fallin thinks the low interest rates that accompany a slowing economy present the right opportunity for a bond-financed program.

"The new bond wouldn't be issued until 2018, when 40% of our existing bond principal rolls off the books," Fallin told lawmakers. "So we can do this in a way that doesn't affect next year's budget."

The state's revenue woes have begun to impact its bond ratings, with Moody's Investors Service on Dec. 23 revising the outlook to negative on its Aa2 general obligation bond rating.

"The negative outlook reflects the fiscal effect of an 18-month decline in the energy sector and the prospects for a prolonged, muted recovery in prices and production," analysts wrote.

"We expect the state to use reserves to address a sizeable structural budget gap going forward," they wrote. "Revenues this year have significantly underperformed what was budgeted for fiscal 2016 and are expected to remain weak in fiscal 2017."

The first $50 million bond sale for Capitol repairs came one year ago through the Oklahoma Capitol Improvement Authority.

The AA-rated serial bonds, which reach final maturity in 2025, earned a true interest cost of 1.63%.

The remaining $70 million is expected to be sold in 18 to 24 months, according to State Bond Advisor James Joseph.

 "We are working with the construction team to determine when additional funding will be needed," he said.

The OCIA, created to finance construction and lease of state buildings, has about $1.1 billion of bonds outstanding, according to last official statement.

Although most lawmakers did not expect the first $120 million to cover the full cost of the repairs, some were surprised that the cost of completion would be more than twice the first authorization.

At a meeting of the State Capitol Repair Expenditure Oversight Committee, legislators learned that it would take an additional $122 million to make the needed repairs. For another $65 million contractors would provide a three-story parking garage, a reflecting pool and an archway for a planned park on the Capitol grounds.

Sen. John Sparks, D-Norman, the Senate minority leader, scoffed at the proposed arch, saying "the excess is inexcusable."

The reflecting pool and arch would cost an estimated $28.5 million. John Estus, a spokesman for the Office of Management and Enterprise Services, said the arch might be financed with private contributions.

The Capitol's dome, added to the building in 2002, was financed entirely by private donations.

Unfortunately, cracks discovered in the dome's stone panels will require costly replacement, according to construction engineers.

"Cracks exist at a total of 172 units, or approximately 10% of all cast stone units on the dome. Most of the cracks occur at the base of the dome," according to a report by Wiss, Janner, Elstner Associates, or WJE, a Chicago company that did a detailed examination of the building's exterior.

Estus called the discovery a surprise. The reason for the cracks in the relatively new structure and what should be done about them are yet to be determined.

Adding a parking garage would cost an estimated $20.5 million, Estus said. The remaining $16 million of the $65 million in costs would be for fees and insurance.

The cost of restoring the building has risen as work progressed because crews discovered issues that were revealed along the way.

For example, the cost of replacing the building's windows rose when crews discovered the advanced state of deterioration. The windows were cemented in place and will had to be cut free to make room for replacements.

Workers also had to re-mortar and re-anchor limestone blocks that form the building's façade, with some requiring replacement.

The Oklahoma Capitol is one of several across the nation that have required costly repairs in the past decade.

In neighboring Kansas, the original $120 million estimate to restore the 112-year-old copper-topped Capitol soared to $325 million when it was found to be in worse repair than originally thought. The entire structure of the original dome had to be replaced.  Kansas lawmakers met in the fully restored building in Topeka in 2014.

Oklahoma's Capitol in Oklahoma City was completed on June 30, 1917, and was designed to support a dome. However, budget issues prevented the state from actually putting a dome on the building until 2002.

A 17-foot-tall, 6,000-pound, bronze statue of an American Indian with a lance and a shield in his hand tops the dome.

"This building, more than any other, is irreplaceable to Oklahomans," Fallin said.

"The Capitol is Oklahoma's second-largest tourist attraction, drawing tens of thousands of visitors yearly," she said. "As such, we need to update safety measures whenever possible."

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