The City of Sammamish has the ability to provide financial support to developers to kick-start the Town Center (see following post). And there is a way to do so in a partnership, not an up-front gamble in today’s dicey marketplace.
The City’s current newsletter discusses the conservative approach taken by the City which avoided fronting infrastructure costs or land purchases for developers that would have stuck taxpayers with the burden following the September 2008 financial market meltdown and resulting global recession.
This has indeed been a prudent approach. One only has to look at the Murray Franklyn project and the William Buchan development at SE 4th/218th and SE 8th/212th respectively to see what might have resulted had the City committed funds prematurely.
As the following post details, Town Center policies provide for “regional” storm water management systems and parking structures for environmental protection and policy reasons. Accordingly, it makes sense to consider–and in my view, proceed with–financial help to achieve these goals.
Here’s how this can be done.
- The City Council has the authority to issue what are called “councilmanic bonds,” which are general obligation bonds (debt) owed by the City to the bondholders. These bonds do not require voter approval. This means the City Council will have to have the political will to issue these bonds in the pursuit of public policy established by several City Councils dating to 2001.”
- A City official told this column that “based on year-end 2009 data, our capacity for councilmatic (also called councilmanic) debt is approximately $145M. I note that we have $2.44M principal remaining in a bond for park land acquisition and $6.40M left in a Public Works Trust Fund loan. Under state law, bonds and government-to-government loans are two of the seven types of instruments to evidence debt, both councilmatic and General Obligation.”
- Repayment can come out of the City’s general budget, which is strained because of declining revenues due to the recession, or the Council could adopt a utility tax to repay the debt. Let’s note that it is highly unlikely that any development will occur–and therefore the need to issue bonds to help finance anything suggested by these columns–until after the economy recovers, in which case a utility tax might not be needed. But this option exists, and like issuing bonds, the Council would have to display a level of political will that heretofore hasn’t been particularly evident. (The decision to put a Parks Bond issue to the voters rather than just issuing the bonds is a prime example.)
- From a City official: “Utility taxes may be levied on the gross operating revenues earned by private utilities from operations within the boundaries of a city and by a city’s own municipal utilities. “Utilities” include electric, water, sewer, stormwater, gas, telephone, cable TV, and steam. Note that utilities will often break out the amount of the tax on the bill, the tax is legally levied on the utility, not the customer and must be paid from utility revenues. Legislation passed in 1982 limits the tax rate that a legislative body may impose on electric, gas, steam, and telephone utility services to six percent. Cellular telephone and pager services may be taxed at the same rate as other telephone services. A city may ask the voters to approve a rate of higher than six percent on these utilities.”
- If the bonds were used to kick-start the Town Center, subsidizing infrastructure (as defined, which could be roads, storm water management, parking garages, etc.), some sort of recapture mechanism could be crafted such as latecomers’ fees, revenue sharing from rents/sales from the builders.
- Finally, and this is key to this entire concept, the City’s money should be “the last money in.” By this I mean that a developer would be required to get all other financing committed and only then would the City’s share be provided. In this fashion, the City would not be “fronting” money but instead would be “supporting” a developer who is tasked with carrying out city policy adopted in the Town Center Plan designed to protect the environment and carry out other policies deemed important.
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