Tulsa City Council members were told last week that expenses for a new city hall will exceed revenues by almost $1.3 million, some $650,000 more than expected when they approved the acquisition of the building in July 2007.

The city purchased the 15-story One Technology Center in downtown Tulsa with the proceeds from $74.2 million of lease revenue bonds issued in November 2007 by the Tulsa Public Facilities Authority.

The 2007 sale included $37.5 million of tax-exempt bonds and $36.7 million of taxable bonds. The taxable debt was required because lease-paying tenants are expected to occupy several floors.

The authority's bonds are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's.

Tulsa finance director Mike Kier told councilors that expenses will exceed revenue by $1.26 million in fiscal 2010. That difference has been figured into the current budget, he said, and could be sustained through 2012.

When the move was proposed by Mayor Kathy Taylor two years ago, Tulsa officials said the consolidation of city departments in the new facility would pay for itself by eliminating the need to lease off-site office space.

Kier said most of the cost can be attributed to the inability to lease space in the building not needed for city operations, which was a prime component in the original business plan. There are currently two unoccupied and unleased floors.

The financial model developed by Staubach Co. figured that all the floors would be leased by 2009, generating $8.6 million a year. The model used by the City Council predicted one floor would not be leased by this year, with total facility lease revenues of $8.1 million.

Other costs include higher-than-expected elevator maintenance, increases in utility costs, and the unanticipated repair or replacement of equipment, Kier said

He said the three-year fiscal model used by the city estimated that initial expenses would exceed first-year revenues by $610,000.

The Tulsa Public Facilities Authority purchased the 15-story building from Leucadia National Corp. for $53.5 million, and is leasing it to the city.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.