REPORT TO THE CITY COUNCIL rd Avenue NE, Woodinville, WA

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1 To: Honorable City Council From: Richard A. Leahy, City Manager CITY OF WOODINVILLE, WA REPORT TO THE CITY COUNCIL rd Avenue NE, Woodinville, WA By: Alexandra Sheeks, Assistant to the City Manager k i> Subject: Jim Katica, Finance Director Old Woodinville Schoolhouse Financing Options Date: 12/11/2012 FINANCIAL ACTION SUMMARY Expenditure Required Amount Budgeted/Approved (Over)/Under Approved Amount $32,500 $3,000 ($29,500) ISSUE: Shall the City Council review options for the future of the Old Woodinville Schoolhouse and select a preferred approach? STAFF RECOMMENDATION: To select a preferred approach, make necessary decisions to implement the preferred approach, and authorize the City Manager to expend amounts necessary to implement the preferred approach. BACKGROUND: The City Council has been reviewing various options for the Old Woodinville Schoolhouse since 2011, when a preliminary architectural and feasibility study was presented. At that time, the Council directed staff to prepare a Request for Proposals (RFP) to seek noncity rehabilitation and operation of the building. On May 8, 2012, the Council reviewed three concepts for an RFP prepared by the City's consultant. The Woodinville Heritage Society requested that the Council postpone a decision until the Heritage Society could present an approach for the building. On September 11, 2012, the Heritage Society presented its vision to rehabilitate and operate the building, which involves funding the rehabilitation through a voter-approved bond and subsequent City ownership and on-going operation of the building. If the Council desires to proceed in this direction, there are a number of decisions to be made, consultants to be retained, and information to be compiled and analyzed. Staff will present issues and timelines associated with pursuing an election for a bond measure. Attached is information to assist in that discussion. RECOMMENDED MOTION: For Discussion Only. Attachment 1: Old Woodinville, School Issues/Decisions Attachment 2: Upcoming Elections Attachment 3: Upfront Preliminary Costs 1

2 Attachment Old Woodinville School Issues/Decisions December Operation/management of the Building after Rehabilitation a. No city use planned for the building b. By the City of Woodinville? c. By a non-profit? d. By a for-profit? e. How will tenants be determined? f. How will tenant rents be determined? g. How will operating deficits be funded? h. How will building repairs, replacements, and maintenance be handled? 2. Required Project Elements a. Level of Building Rehabilitation b. Parking c. Special user accommodations (performing arts, restaurant,...) d. Town Center Commons Green on Parking Deck (funded by City if financially feasible?) 3. Cost of Construction a. Need to retain consultant and incur preliminary design costs in advance of voter action 4. Financing Method a. Need to retain consultant and incur preliminary costs in advance of voter action b. Taxable vs. Tax-Exempt Bonds c. Lid Lift Bonds (50% approval) vs. Voter Approved Bonds (60% approval) d. Cost to typical homeowner, including number of years to repay bond e. Determine whether grants are available and advisable f. Resolve how building operation deficits are funded 5. Voter Preference Survey a. Need to retain consultant and incur preliminary costs in advance of voter action b. At the beginning of this process before any additional work is conducted? c. Later in the process when specific information is known? 6. Election Ballot a. Special Election? b. Primary Election? c. General Election? d. Cost 2

3 Attachment 2 Upcoming Elections and 2014 Estimated Costs and Deadlines Estimated Cost Type of Deadline to File Election Date Election Resolution Voters Election Voter Info Total Cost Pamphlet Feb. 12, 2013 Special Dec. 28, 2012 $16,000 $1,500 $3,000 $20,500 Apr. 23, 2013 Special Mar. 8, 2013 $16,000 $1,500 $3,000 $20,500 Aug. 6, 2013 Primary May 10, 2013 $10,000 $1,500 $3,000 $14,500 Nov. 5, 2013 General Aug. 6, 2013 $10,000 $1,500 $3,000 $14,500 Feb. 11, 2014 Special Dec. 27, 2013 $16,000 $1,500 $3,000 $20,500 Apr. 22, 2014 Special Mar. 7, 2014 $16,000 $1,500 $3,000 $20,500 Aug. 5, 2014 Primary May 9, 2014 $10,000 $1,500 $3,000 $14,500 Nov. 4, 2014 General Aug. 5, 2012 $10,000 $1,500 $3,000 $14,500 Notes 1. Election costs are based on how many other jurisdictions have issues on the ballot, whether or not it is a special election, etc. 2. Timelines are dependent on the selected process for analyzing rehabilitation costs, seeking bond counsel, surveying voters, etc. 3

4 Attachment 3 Estimated Upfront Preliminary Costs Bond Issue to Rehabilitate Old Woodinville School December 2012 Item Est. Cost Comments Financial Advisor Architect Survey Election Total Est. Costs $3,000 Additional costs if bonds issued. $10,000 Additional costs if bonds issued. $5,000 Offer to cost split with Woodinville Heritage Society $14,500 Assumes Primary or General Election Ballot with voter information $32,500 Some costs may be eligible for reimbursement from bond proceeds. 4

5 Old Woodinville Schoolhouse Rehabilitation Options City Council Meeting 12/11/2012

6 Background 3 Phase approach Phase 1 completed May 2011 with reuse study Council chose Options C or D solicit proposals from private developers Heartland options for RFP presented April 10 Woodinville Heritage Society Presentation September 11 City Council asked for information about a Voter Approved Bond Issue to rehabilitate the Schoolhouse

7 Issues/Decisions to Move Forward 1. Operation/management of the building 2. Required Project Elements 3. Cost of Construction 4. Financing Method 5. Voter Preference Survey 6. Election Ballot

8 1. Operation/management of the building a. No city use planned for the building b. By the City of Woodinville? c. By a non-profit? d. By a for-profit? e. How will tenants be determined? f. How will tenant rents be determined? g. How will operating deficits be funded? h. How will building repairs, replacements, and maintenance be handled?

9 2. Required Project Elements a. Level of Building Rehabilitation b. Parking c. Special user accommodations (performing arts, restaurant, ) d. Town Center Commons Green on Parking Deck (funded by City if financially feasible?)

10 3. Cost of Construction a. Need to retain consultant and incur preliminary design costs in advance of voter action

11 4. Financing Method a. Need to retain consultant and incur preliminary costs in advance of voter action b. Taxable vs. Tax-Exempt Bonds c. Lid Lift Bonds (50% approval) vs. Voter Approved Bonds (60% approval) d. Cost to typical homeowner, including number of years to repay bond e. Determine whether grants are available and advisable f. Resolve how building operation deficits are funded

12 5. Voter Preference Survey a. Need to retain consultant and incur preliminary costs in advance of voter action b. At the beginning of this process before any additional work is conducted? c. Later in the process when specific information is known?

13 6. Election Ballot a. Special Election? b. Primary Election? c. General Election? d. Cost

14 Financing Capital Projects

15 LTGO(councilmanic) Pros No citizen vote is required Cons Debt payments from existing GF revenues Competes with scarce operating revenues used for City operations

16 Definitions/Acronyms Debt Service The annual principal/interest payment on bonds Our mortgage payment would be our debt service G.O. General obligation Pledges the full taxing authority of the jurisdiction UTGO ( voted ) Unlimited general obligation bonds Usually backed by the property tax (and all other sources) Require a 60% approval from voters LTGO Limited tax general obligation non-voted debt or councilmanic Debt service is paid from existing revenues Does not require a vote of the citizens

17 G.O. Bonds UTGO and LTGO can be for a few years or as many as 40 (usually 20 years)

18 Other Methods Increase taxes Utility taxes Property taxes Banked Capacity Existing Funds

19 Levy LID Lift Levy Lid Lift Requires a 50% + 1 vote For debt service, can be no longer than 9 years

20 Other Methods Increase taxes Utility taxes Property taxes Banked Capacity Existing Funds

21 Pros and Cons of each UTGO Pros Voters get to decide the outcome Current operating and capital revenues untouched Cons Debt obligation for 20 years (normally)

22 Levy Lid Lift Pros 50% + 1 needed for approval Paid off in a (relatively) short time Cons Annual debt payments are higher than 20 year GO bonds Taxing rate counts against maximum regular tax levy $2.10 while benefit charge is in place $1.60 if benefit charge was not passed by voters

23 What will it cost? Assumptions: Assessed Valuation = $2,444,408,335 Average Value of Woodinville home= $358,000 Amount of bonds to be sold: $8 million

24 Bond Options What will it cost? $8 million bond issue Option Annual Debt Service Cost for Typical Homeowner Yearly Monthly 20-Year GO Bond $568,000 $83 $ Year Lid Lift Bond $989,000 $144 $12.00

25 Cost per Month for Various Bond Amounts

26 Ballot Options and Costs Election Date Type of Election Deadline to File Resolution Election Estimated Cost Voters Pamphlet Voter Info Total Cost Feb. 12, 2013 Special Dec. 28, 2012 $16,000 $1,500 $3,000 $20,500 Apr. 23, 2013 Special Mar. 8, 2013 $16,000 $1,500 $3,000 $20,500 Aug. 6, 2013 Primary May 10, 2013 $10,000 $1,500 $3,000 $14,500 Nov. 5, 2013 General Aug. 6, 2013 $10,000 $1,500 $3,000 $14,500 Feb. 11, 2014 Special Dec. 27, 2013 $16,000 $1,500 $3,000 $20,500 Apr. 22, 2014 Special Mar. 7, 2014 $16,000 $1,500 $3,000 $20,500 Aug. 5, 2014 Primary May 9, 2014 $10,000 $1,500 $3,000 $14,500 Nov. 4, 2014 General Aug. 5, 2012 $10,000 $1,500 $3,000 $14,500

27 Preliminary Costs to Get to Ballot Item Est. Cost Comments Financial Advisor $3,000 Additional costs if bonds issued. Architect $10,000 Additional costs if bonds issued. Survey $5,000 Election $14,500 Total Est. Costs $32,500 Offer to cost split with Woodinville Heritage Society Assumes Primary or General Election Ballot with voter information Some costs may be eligible for reimbursement from bond proceeds.

28 Option Schedules Task APRIL 23, 2013 BALLOT 1. Operation/Mgt of Building 2. Required Project Elements 3. Cost of Construction 4. Financing Method 5. Voter Preference Survey 6. Election Ballot Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec AUGUST 6, 2013 BALLOT 1. Operation/Mgt of Building 2. Required Project Elements 3. Cost of Construction 4. Financing Method 5. Voter Preference Survey 6. Election Ballot NOVEMBER 5, 2013 BALLOT 1. Operation/Mgt of Building 2. Required Project Elements 3. Cost of Construction 4. Financing Method 5. Voter Preference Survey 6. Election Ballot Key Drafting, Securing Consultants Research, Decision, Action Election Day

29 Conclusion We need to start making decisions! 1. Election Date 2. Building Mgt/Operation 3. Project Elements 4. Determine Cost of Construction 5. Timing of Survey 6. Decide Financing Approach