TO: Mayor and City Council
THROUGH: Krishna Namburi, City Manager
FROM: Josh Eggleston, Chief Financial Officer
SUBJECT:
title
Use of Salem Safety and Livability Bond Premium for electrical upgrade improvements for the Civic Center Seismic retrofit project.
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
Result Area(s): Good Governance; Safe, Reliable and Efficient Infrastructure.
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SUMMARY:
summary
As recommended by the Bond Oversight Committee during its April 23, 2026, meeting, City Council is asked to approve the use of $1.5 M in bond premium to upgrade the system to current requirements.
The 2022 Safety and Livability Bond project for Civic Center Seismic Improvements includes structural seismic retrofits along with rehabilitation and replacement of other building systems. Despite their age, electrical system improvements were not included in the original scope of work since they remained functional. However, through the course of construction, code deficiencies were identified in the existing electrical grounding system that were previously unknown. Additional review by the electrical contractor revealed that the existing system is not code compliant and not safe for property or persons, which was not known during early decision making for the project and has only been discovered as the construction project has provided more access to the building.
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ISSUE:
Shall City Council approve the use of $1.5M in bond premium to pay for electrical upgrade improvements for the Civic Center Seismic project?
RECOMMENDATION:
recommendation
Approve the use of $1.5M in bond premium to pay for electrical upgrade improvements for the Civic Center Seismic project.
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FACTS AND FINDINGS:
The Civic Center building was built in 1972 and has multiple building systems that have exceeded their service life. To meet the project budget, replacement and rehabilitation of various systems were evaluated and prioritized for inclusion in the project scope of work. While it was known that the electrical system was beyond its typical useful life, the system had received prior improvements and was functioning. Therefore, its replacement was not included in the original scope of work.
During an electrical inspection in March 2026, electrical code compliance deficiencies were identified in the existing electrical grounding system that were previously unknown. The electrical contractor, OEG Engineering, reviewed the inspector’s concerns and performed a review of additional existing electrical system conditions that were not accessible during the preconstruction phase of the project. Their report found that the existing system is not code compliant and not safe for property or persons. Electric panel and circuit breaker replacements along with grounding system upgrades are required to meet code and ensure a safe facility for the future. Below is a list of the electrical improvements:
Code Required Changes
• Upgrade electrical system to meet grounding code requirements
• Replace code deficient branch circuit panelboards
• Replace distribution switchboards and end-of-life circuit breakers
Financial Implications
When the Salem Safety and Livability Bonds were sold in February of 2023, the City received over $7.2 million in bond premium, with an additional $3.2 million received with the recent second bond sale in April 2026. Bond premium is essentially an additional amount the buyer is willing to pay when the coupon rate is higher than the current market rate. Bond proceeds and premiums also accrue interest until the funds are needed for projects. The premium and interest earnings have the same restrictions as bond.
After administrative expenses and commitments to other projects, there are currently $16.6 million available in premium and interest for the overall bond program. Due to the critical need to ensure a safe and resilient Civic Center with this project, staff believes the use of bond premium is appropriate for this additional project expense.
BACKGROUND:
The Salem Safety and Livability Bond was approved by Salem voters in 2022 to fund several different project types across the City. Of the $300 million approved by voters, $39.45 million was approved for Civic Center Seismic improvements. $3 million in other City funding and a previous bond premium release of $1.08 million bring the total project budget to $43.53 million. The use of bond premium for electrical upgrades for the Civic Center project was recommended to Council by the Bond Oversight Committee at their April 23, 2026 meeting.
Attachments:
1. None.