With employees occupying hallways, the attic and the basement in City Hall, the space crunch bedeviling city government is no illusion.

"People are everywhere," said City Manager Philip Hertz, who supervises the city's 113 employees, 35 of whom are stationed at the 2 1/2-story mansion-turned-City Hall on Longwell Avenue. "One person's desk is in the basement with the furnace and the records storage."

But that's where much of the consensus on city space needs ends.

Since April 18, when the City Council proposed putting $1.3 million toward new office space in the coming budget year, the project has been the subject of growing debate.

Mayor W. Benjamin Brown initiated the dissent and was joined last week by candidates vying for council seats in the May 13 election. The opponents have raised two questions:

* Should money be budgeted before a consultant completes a $35,000 study that will say how much space is needed and what it will cost?

* Should the city pay for the project up front or take out aloan?

The council will discuss the office space proposal and the rest of the draft budget at a special public hearing tomorrow at 7:30 p.m. at City Hall. The council is expected to act on the proposed $5.3 million spending plan for the coming fiscal year at its May 13 meeting.

Coupled with $275,000 the council put in the current year'sbudget, the amount earmarked for new office space would near $1.6 million under the proposed spending plan. The money would go toward design and preliminary construction.

Complicating the debate over thecity's quest for additional office space are other questions for which there are no solid answers.

* How much will the project ultimately cost?

No one knows for sure. City administrators have declinedto hazard a guess. Councilman Mark Snyder said it can be completed for $1.6 million. Brown said it will cost $3 million or more.

* What exactly will the money buy?

No one knows that either. An addition to 6,100-square-foot City Hall, a new building adjacent to it or onother property, renovation of other city-owned properties, and rental space all have been considered, said Snyder, who is chairman of thecouncil's public improvements subcommittee.

But no firm plan willtake shape before Baltimore-based Cho, Wilks & Benn Architects Inc. presents its report to the council late this month or early next month.

* How much space is needed?

Again, no firm answer. Snyder thinks the report will suggest adding up to 9,000 square feet.

Brown, along with Kenneth Yowan and other council candidates, have called for budgeting to be delayed until the report comes back and a clearerpicture of new city office space comes into focus.

"We can affordto wait a couple of weeks, a couple of months," Yowan, a former council member, said Monday during a candidates forum.

Then there's the ongoing argument between Brown and the council -- no strangers to bickering -- on how best to pay for more space.

The council wants to use money from a variety of sources. The $265,000 in the current budget came from general tax revenue, such as property taxes, with $550,000 more proposed for the coming year. Another $250,000 would come from impact fees on new development, with $270,000 more from the city's water and sewer funds.

Council members say the city should pay for the project up front while it can afford to, and thus not burden residents with debt for years to come.

"Most municipalities do not enjoy that luxury right now," said William Kelly, senior vice president of the investment firm Ferris, Baker, Watts Inc. in Westminster.

Brown counters that a bond issue is more appropriate because it would spread the financial responsibility across several generations of residents.

"It's a better time (for a bond issue) than it's been for a long time because interest rates have declined appreciably," said Kelly.

Brown adds that it would be more prudent to invest the $1.6 million. After 30 years -- a typical term for a bond issue -- thecity could earn some $12 million, he said, which would be more than enough to pay off the bond issue.

"That's a way of distorting things," said Snyder, adding that $12 million probably won't look as attractive in the year 2021.

He and other council members said a bond issue would double the final cost of the project.

"It may double the cost, but if you but if you kept money in the bank you still couldcome out with positive cash," said Sam Fales, vice president and co-manager of the municipal bond division of the investment firm Legg Mason in Baltimore.

"Why spend your cash?" Fales said. "It's hard for municipalities, so many are having difficult times. The city could be ahead of the game by keeping its money."

What the debate has showcased, more than anything, are the differing fiscal philosophies ofthe mayor and council.

"Both arguments are, in a sense, conservative positions," Fales said. "I think it's more conservative to keep your cash and borrow at these lower rates."

Whatever decision is made, the council won't be able to claim a lack of data. After the consultant's study was under way, city administrators unearthed a previous space-needs report, done in 1985.

The study cost about $8,000, said city Planning Director Thomas Beyard, but has pretty much sat on a shelf ever since.

"We didn't even know it was around," said Snyder, who joined the council in 1987.

However Snyder and Beyard saidthe limited scope of the 1985 study would have required more consulting work anyway.

"The results would've been exactly the same," Snyder said.

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