The city of Mercer Island has proposed seeking a consolidated bond to cover a $9.25 million shortfall in the sewer lake line project, as well as $900,000 for improving the South Mercer Playfields. Finance Director Chip Corder, along with the city’s financial advisor, Seattle Northwest Securities, and its bond counsel, K&L Gates, have recommended issuing limited tax general obligation (LTGO) bonds to finance both projects. Councilmembers first discussed this decision during their July 6 meeting.
The total amount to be financed is $10.36 million: $9.25 million for the sewer lake line project; $990,000 for the South Mercer Playfields and $120,000 for estimated bond issuance costs.
According to Corder, there are advantages to financing two projects with one bond. Not only will the city save on bond issuance costs and interest rates (an estimated savings of .24 to .5 percent), but it can issue the bonds without having to establish a debt service reserve or adopt rate covenants. The City Council is in support of this plan.
Two different terms apply to the city’s consolidated debt service schedule: Approximately 20 years for the sewer lake line project and about 13 years for the South Mercer Playfields improvements.
Also, the debt service on the LTGO bonds will be paid from two different revenue sources: sewer utility revenues for the lake line project, and general purpose revenues — from the General Fund — for the South Mercer Playfields improvements.
Plans to improve the South Mercer Playfields date back to spring, 2008, when Island voters approved a $900,000 levy in support of parks. But because the 2008 park bond failed, $128,000 of the levy — designated for capital project operations and maintenance — could not be collected. The school related parks and recreation activities section of the levy, making up $260,000, was also thrown into question.
During the January 2009 City Council planning session, the City Council-School Board Ad Hoc Commitee, comprised of Mayor Jim Pearman, and Councilmembers Dan Grausz and Steve Litzow, agreed that securing a bond would be an appropriate alternative funding method for school related park and ball field improvements.
The first phase of ball field improvements will focus on the substandard South Mercer Playfields, between Lakeridge Elementary and Islander Middle School, according to the city’s plan. A number of Island sports teams use these fields, including the Mercer Island Boys & Girls Club little league and girls softball teams, the Mercer Island School District girls fast pitch and softball teams and the Jewish Community Center’s softball leagues.
The estimated $990,000 cost will go toward installing synthetic turf infields with improved drainage, new scoreboards, and — potentially — a concession stand and screened bullpen area, if funds allow.
As for the sewer lake line project — the largest capital project in city history at $26.7 million — the unfunded balance of $9.25 million needs to be addressed by September, when current resources are projected to be fully spent.
The record-breaking funds will go toward repairing the Island’s 7,500-foot-long underground sewer pipe, which runs along the shores of Lake Washington from Proctor Landing to Roanoke Way. The project also includes a new pump station near Faben Point. Work on the sewers began late last month.
Corder will begin bidding this month. “Delegation” language has been included in the bond ordinance to give the city manager — or finance director — the authority to make a decision on the bid award under two circumstances: That the amount not to exceed $11.0 million; and that true interest costs less than 6 percent. This will provide the city with flexibility in choosing which day to solicit competitive bids.
Now that the City Council has approved the agenda item in its second reading, the consolidated bond will be rated and advertised. A bid could be awarded as soon as Aug. 3. Corder will report back to the City Council once a bid is settled.
