At their April 7, 2015 meeting, City Council entered into an agreement with SOZO Sports of Central Washington to collaborate in the design, development and operation of a world-class Yakima Sports Complex. The April 7 agreement only contemplated the purchase of about 42 acres, with the City providing $4.1 million for the purchase and development. Councilman Lover, with the support of the City Council, requested that the City and SOZO consider budgeting funds for additional adjacent property to meet the long term needs of the sports complex. Subsequent to this action, SOZO is proposing to purchase an additional 60 acres. Council agreed to the concept, and currently there is a tentative agreement under consideration between the parties as to how the cost will be shared. Because the price of the second acreage has not yet been agreed upon, we set the language in the bond ordinance at "not to exceed" $5 million, which leaves up to $900,000 available to accomplish the purchase of the 2nd 40 acres. If the purchase price is less than the $900,000, then the City can use the remaining bond proceeds for other park capital needs.
Prior to issuing bonded debt on the City's behalf it is necessary, per section 12 of the City Charter, that the Council approve the terms and form of the bond by Ordinance. Historically, the City has issued municipal bonds to accomplish a project like this. However, in current market conditions bank financing is a better option for us, and the City was able to obtain favorable debt terms. Bank financing has much lower "up front" costs, as there is not an Official Statement to prepare, and there are no underwriting fee. Bond Counsel is still necessary, but since there is considerably less risk and fewer disclosure requirements, the fee will be 40% less than a traditional bond issue. Another cost usually imposed is a loan origination fee which the bank has waived for the City. Overall, the cost of bank financing will save the City about $40,000 in direct costs and uses much fewer staff resources.
The enclosed Bond Ordinance will authorize staff to take all necessary steps to secure bank financing in the form of a Limited Tax General Obligation bond (i.e. councilmanic, not voted) in an amount not to exceed $5M, for 20 years, with three interest rate resets at each 5 year mark, at an initial interest rate of 3.3% with an annual debt service of approximately $400,000. The enclosed Memorandum details the process and the decision points leading to the Bond Ordinance contained herein. |