FAQs – City Hall Complex Project

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• Why is the city building a new City Hall Complex?

  The old City Hall had become functionally obsolete and no longer met the needs of the city. Most of the Police Department’s operations occured in the basement. The police were forced to function in an area that was cramped and lacked adequate heat, air conditioning and ventilation. They lacked the necessary facilities to safely and securely hold detainees. There was no way to segregate minors from adults that were being detained. In addition, the building was constructed in 1964 when handicapped accessibility was not a consideration. Neither the City Hall nor the Police Department met even the basic accessibility standards. The inadequacies reached a point where they hampered city operations, increased maintenance costs, and negatively impacted our residents and visitors.

• Was remodeling and adding on to the current City Hall investigated?

  Yes, as part of the planning process this was considered. The retrofitting was shown to be too challenging, a poor investment and the existing structure would not accept a needed second floor.

• How was the decision made to build a new City Hall Complex?

  A City Hall Task Force was created in 2011 to study the city’s operational needs and make recommendations. This Task Force, a 14-member group included two retired architects, a member of the local business community, a local accountant/financial advisor, the Mayor and all Commissioners, Police Chief, City Manager, and Chief Building Inspector. The Task Force presented the plan to the Mayor and Commissioners for review and approval. The Mayor and Commissioners approved the current design and worked to create the financing plan for the project. On June 27, 2015, a vote was passed (701-544) by citizens approving allowing the city to borrow $18 million for the new City Hall Complex.

• What was demolished?

  The old Parking Department building, the old Communications Department (Rehoboth Beach Main Street) building, and the old City Hall have been completely demolished. The new City Hall of 44,000 square feet housing the administrative functions of the city and the Police Department is being built on the site of the old City Hall. A new building of 3,500 square feet was built to replace the old Parking Department and Communications Department buildings. A new lobby and new modern bathrooms for the Convention Center will be constructed and the Convention Center exterior will be reskinned to tie it into the new building. Both the east and west parking lots will be reconfigured and repaved.

• What functions will be housed in the new City Hall?

  The following functions will be consolidated into the new City Hall:
   - Administrative Offices
   - Alderman's Court
   - Building and Licensing Department
   - Commissioners Room
   - IT Department
   - Police Department
   - 911 Dispatch Center

• What is the schedule for this project?

  The buildings that house the Parking Department and the Communications Department were demolished after the 2015 summer season and the new building to house these two department’s was completed in May 2016. Mobile office trailers were placed in the east side parking lot and city staff relocated to these trailers in the Fall of 2015. Immediately following this move demolition began on City Hall. Construction of the new City Hall is scheduled for completion in the Fall of 2017.

• How will the city function during the period of construction?

  Mobile office trailers house the existing employees and the Police Department during construction. Public meetings of the Commissioners and other public entities are held in the Rehoboth Beach Volunteer Fire Department in the second floor social hall.

• Will the Convention Center remain in operation during construction?

  No. The decision was made to close the Convention Center during construction. A number of factors went into this decision. Portable bathrooms would have to be brought in, temporary utilities would be necessary and finally the whole area will be a construction site. There will be no parking and it will be difficult to maintain safe passage around the building. The Convention Center closed the first week of November 2015. All groups with events planned at the Convention Center during construction have been advised of this schedule.

• What is the estimated cost of the project?

  The referendum set a maximum of $18 million for borrowing funds to construct a new City Hall Complex. Voters approved the loan from the USDA with an expected interest rate of 3.5%, for a 25-year term. The breakdown of annual payments on the $18 million loan are as follows: $1,092,150 annual payment for 25 years. In January 2016, with only two bids received for construction, the low bid from Whiting-Turner was already approximately $1.5-$2 million over budget. At that time, Commissioners voted unanimously to move forward with the understanding that total costs associated with City Hall would exceed the original estimates and need to be accounted for in the next several budget cycles. As with any construction project, change orders have also added to the cost, with approximately $1 million approved and pending, well below a 10% average for such changes. The largest cost item totaling approximately $150,000 is due to extra stormwater expenses mandated by the state. In all, the cost of the new City Hall is now projected to be $20.6 million, including expenses incurred in prior years for designing and planning and those outside the scope of the original plan, such as landscaping. However, these costs are offset by a significant savings on the loan financing, because in December 2016, the city was able to obtain a loan from USDA at 2.375%, lowering annual payments by about $123,000 and saving $3 million over the life of the loan. The city could borrow additional money to cover the immediate additional costs without going back for another referendum, but this step will not be necessary. Approximately $1 million will be used from city funding reserves to cover the costs that have not already been paid. This is not unprecedented as the city has managed its finances quite conservatively and is fortunate to have a "rainy day fund" surplus to be used for this purpose.

• What is included in the $18 million?

  Demolition of the existing building and construction of the new City Hall and Parking Department/Communications Department building, architectural and engineering fees, bidding and construction contingency, owners contingency and an allowance for furniture, fixtures and equipment are included. 

• How will this project be financed?

  The City applied for an $18 million loan from the United States Department of Agriculture, through its Community Facilities Program, to fund this project at a maximum interest rate of 3.5%. The term of the loan could be from 20 to 40 years. USDA funding comes after the completion of the project and the City has obtained interim financing from a bank for the period of construction. Rehoboth Beach plans to pay off the $18 million USDA loan for construction of a new City Hall early. At their regular meeting on December 16, 2016, with the opportunity for obtaining a lower interest rate, the Rehoboth Beach Commissioners adopted all resolutions necessary to permit the closing on the USDA $18 million loan before the end of December 2016. On December 20, 2016, the City authorized the issuance of its General Obligation Bond in the maximum principal amount of up to $18 million at a fixed interest rate of 2.375% for a 25 year loan period. This equates to an approximate savings of $123,000.00/year and $3 million of savings for the length of the loan. Obviously this is very good news to report as the City remains committed to its longtime philosophy of being fiscally conservative with taxpayer money.

• How will repayment of this loan be funded?

  Annual debt service on the loan is $1,092,150 and repayment will likely start in the Fall of 2018. The city has a current loan that funded Rehoboth Avenue Streetscape project, the first phase of Boardwalk reconstruction and other projects. This loan has annual payments of $735,000 and will be retired on September 1, 2017. The revenue stream that has been used for this loan will be directed to pay the City Hall loan once the first loan is retired. The additional $360,000 annually can be paid from a number of revenue sources without raising real estate taxes.

• Who can I contact to get information about the City Hall Project?

  For more information about the project, please contact the Communications Department at 302-227-2772 or email [email protected].