WL Council faces key decision on bond spending
If the lead up to West Linn's recent vote to renew a general obligation (GO) bond felt like a sprint, the process of obtaining and spending the projected $20 million will be more like an ultramarathon.
And this particular marathon requires a fast start, as the City must make a number of key decisions over the course of the summer. The City Council held a special meeting May 31 to begin that process, and continued the discussion at meetings held June 4 and 5.
In a May 15 primary election, voters renewed a levy that is expected to raise as much as $20 million for capital projects over the next 20 years. The City has identified three areas of focus for the bond spending: transportation, parks and city facilities.
The council faces a June 25 deadline to adopt a supplemental budget that reflects bond spending that will take place in fiscal year 2019.
"We're going to finalize amounts projected to be spent in parks, transportation and city facilities in fiscal year 2019," Finance Director Lauren Breithaupt said at the May 31 meeting. "We also will receive projections from financial advisers on the projected proceeds from bond."
According to Breithaupt, the council will meet July 9 to approve a resolution authorizing the sale of a bond, and by July 30 the City will need a final list of projects with best estimates of how funding will be broken down.
"It doesn't need to be the exact amount," Breithaupt said. "It just needs to be a reasonable amount we can certify."
Staff added that the council would be able to shift some of those allocations around after July 30, if need be, so long as it did not involve a "major deviation" from what was promised to voters.
The expected close date for the bond sale is Aug. 30. From that point, the City will have three years to spend 85 percent of the bond proceeds and five years to spend 100 percent.
With assurances from staff that it would be feasible, the council tentatively agreed May 31 to issue one bond instead of splitting up the funding. Issuing multiple bonds would have extended the deadline for completing projects, but it also would have bumped up the City's costs by an estimated $525,000-$840,000 according to Breithaupt.
"Not only do we incur extra costs, but we don't know what the interest rates are going to be down the road, so we could lose more money," City Council President Brenda Perry said.
Much of the discussion May 31 surrounded the city facilities category of projects, and whether the City should utilize "government" or "nonprofit" bonds. The majority of the projects targeted for bond funding fall under the government category, but the City could use nonprofit bonds if it expects to invest a significant amount of money in city facilities that will be run by nonprofits.
With the Friends of Robinwood Station already in line to manage that building and a group of Bolton neighborhood residents planning to form a nonprofit for the old Bolton Fire Station, nonprofit bonds may be a necessity.
And, according to staff, there isn't a significant difference between the two types of bonds. Government bonds allow for 10 percent of proceeds to be used for either nonprofit or for-profit investment, while nonprofit bonds allow unlimited use of funds for nonprofit or government investment, but cap for-profit investment at 5 percent. From a process standpoint, nonprofit bonds require a Tax Equity and Fiscal Responsibility Act (TEFRA) hearing to be held.
The council did not identify a preferred option at the May 31 meeting, as the question came down to how the councilors felt about various city facility projects. Councilors Teri Cummings and Rich Sakelik — who have been vocal in support of projects at Robinwood Station and the old Bolton Fire Station — favored the nonprofit bond option, while Mayor Russ Axelrod and Perry continued to question the wisdom of investing large amounts in the old buildings.
Discussions continued during a June 5 work session, after the Tidings' press deadline.