CITY OF WOODINVILLE, WA 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.fr e? Subject: Jim Katica, Finance Director Old Woodinville Schoolhouse Escussion Topics Date: 1/22/213 FINANCIAL ACTION SUMMARY Expenditure Required Amount Budgeted/Approved (Over)/Under Approved Amount $32,5 $3, ($29,5) ISSUE: Shall the City Council discuss the issues associated with a potential bond issue and tax increase to fund the rehabilitation of the Old Woodinville Schoolhouse (OWS)? STAFF RECOMMENDATION: To discuss this matter and select preferred approaches. BACKGROUND: The City Council has been reviewing various options for the Old Woodinville Schoolhouse since 211, 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 private rehabilitation and operation of the building. On May 8, 212, the Council reviewed three concepts for an RFP. The Woodinville Heritage Society requested that the Council postpone a decision on the RFP until it could present an approach for the building. On September 11, 212, the Heritage Society presented its vision to rehabilitate and operate the building, which involves funding the rehabilitation through a voterapproved bond and subsequent City ownership and on-going management of the building. On December 11, 212, the Council reviewed a list of issues that should be addressed before placing a bond issue on the ballot. Staff will review and discuss these issues with the Council. ISSUES: The Bonds: The amount needed for the project is not known at this time. Much will depend on the elements included in the project. Preliminary estimates are in the $4 million to $8 million range. Council has identified voter-approved bonds as the preferred method of funding the project. The two most common ways to fund the project are with a levy lid lift or general obligation bonds. Both methods use voter-approved property tax increases to repay the bonds. Lid Lift Bonds require a simple majority to pass, but are limited to a maximum of 9 years. This allows the bonds to be paid off in a shorter period of time, but at a higher annual amount. General obligation bonds can be paid over a longer time period (typically 2 years), have a minimum voter turnout requirement (4% of last general election), require 6% voter approval, allow a lower annual repayment amount, but typically cost more over the life of the bonds because of additional interest costs. Additionally, a decision needs to be made as to whether "tax exempt" or "taxable" bonds should be sold. "Tax exempt" bonds limit the potential tenants/users of the building to governmental or specified non-profit groups; while taxable bonds allow governmental and all types of non-profits or for-profit tenants/users. At this point, the difference in interest rate costs between these two alternatives is considered very modest. 1

2 The Ballot. Previously, the Council informally expressed preference to potentially place this matter on the August 6 Primary or November 5 General Election Ballots. This decision may be affected by the minimum voter turnout requirements associated with the G.O. Bond alternative. Additionally, the issue of conducting a voter preference survey was previously discussed with the Council. It would be helpful for the Council to determine whether it wants to conduct such a survey and if so, when it should be conducted in the process: at the beginning prior to expenditure of additional funds; or just prior to the ballot on which the measure is included. Proiect Elements. To accurately gauge the size of the bond measure, we need to fully understand the mandatory elements for the project, such as: the desired level of rehabilitation, whether the parking lot should include a deck with a park on it, and any special equipment or building features. Operation of the Building. While this may seem unrelated to the rehabilitation portion of the project, it affects every aspect of this effort. The type and/or specific tenants of the building, as well as how it will be managed, how tenants will be selected, how rents will be set, how repairs and building maintenance will be funded or managed could potentially affect other aspects of this effort. If the Council has specific outcomes in mind as to who the tenants will be, how much rent they will pay, how repairs are made and who pays for all of these items, they should be discussed early in the process to determine any legal or financial constraints or limitations. Checklist. Finally, included as Attachment 6, is a Checklist which summarizes these issues/decisions. Staff intends to use this checklist to help us systematically address each of these issues. RECOMMENDED MOTION: For Discussion Only. Attachment 1: Old Woodinville School Issues/Decisions Attachment 2: Upcoming Elections Attachment 3: Upfront Preliminary Costs Attachment 4: Costs of Financing Voter-Approved Bonds Attachment 5: Historical Voter Turnout: Primary and General Elections Attachment 6: Ballot Measure Checklist 2

3 Attachment 1 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 (5% approval) vs. Voter Approved Bonds (6% 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 3

4 Attachment 2 Upcoming Elections 213 and 214 Estimated Costs and Deadlines Election Date Type of Election Deadline to File Resolution Election Estimated Cost Voters Pamphlet Voter Info Total Cost Apr. 23, 213 Special Mar. 8, 213 $16, $1,5 $3, $2,5 Aug. 6, 213 Primary May 1, 213 $1, $1,5 $3, $14,5 Nov. 5, 213 General Aug. 6, 213 $1, $1,5 33, $14,5 Feb. 11, 214 Special Dec. 27, 213 $16, $1,5 $3, $2,5 Apr. 22, 214 Special Mar. 7, 214 $16, $1,5 $3, $2,5 Aug. 5, 214 Primary May 9, 214 $1, $1,5 $3, $14,5 Nov. 4, 214 General Aug. 5, 214 $1, $1,5 $3, $14,5 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. 4

5 Attachment 3 Estimated Upfront Preliminary Costs Bond Issue to Rehabilitate Old Woodinville School December 212 Item Est. Cost Comments Financial Advisor $3, Additional costs if bonds issued. Architect $1, Additional costs if bonds issued. Survey $5, Offer to cost split with Woodinville Heritage Society Election $14,5 Assumes Primary or General Election Ballot with voter information Total Est. Costs $32,5 Some costs may be eligible for reimbursement from bond proceeds. Attachment 4 Estimated Costs of Financing Voter-Approved Bonds Annual Obligation for the Average Household ** $8 mil Bond/Lid Lift Lid lift N/A 5% +1 9 years $72 per year $18 per year $144 per year G.O. bonds 2,441* 6% 2 years $42 per year $63 per year $84 per year * 4% of the 212 General Election * Based on an assessed valuation of an average home $358, Attachment 5 Historical Voter Turnout: Primary and General Elections Year Primary Election Votes General Election Votes 212 2,541 6, ,665 3, ,664 4, ,84 3,463 5

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7 Old Woodinville Schoolhouse Discussion for Potential Ballot Measure January 22, 213

8 Decision Checklist THE BONDS 1. Tax Exempt or Taxable Tax Exempt Taxable Other 2. G.O. Bonds or Lid Lift Bonds G.O. Bonds Lid Lift Bonds Other THE BALLOT 1. Ballot Date Aug. 6, 213 Nov. 5, 213 Other 2. Voter Survey Early Later None PROJECT ELEMENTS 1. Level of Rehab Level C Level D Other 2. Parking Yes No Other 3. Park on Parking Deck Yes No Other 4. Special Fixtures/Equipment Yes No Other OPERATION OF THE BUILDING 1. By City of Woodinville Yes No 2. By Non Profit Yes No 3. By For Profit Yes No 4. How will Tenants be selected? 5. How will Rent Prices be set? 6. How will deficits be funded? 7. How will repairs be funded?

9 The Bonds 1. Taxable vs Tax Exempt 2. GO Bonds vs Lid Lift Bonds

10 Taxable Bonds Allow a wider range of tenants now or in the future. Have a slightly higher cost to taxpayers

11 Tax Exempt Would be slightly less in borrowing costs Would require that 9% of structure be leased to organizations that are 51(c)3

12 Annual Debt Service Costs for $358, Home

13 Levy Lid Lift or GO Bonds Levy Lid Lift Duration would be 9 years Annual payment higher than a 2 year GO Paid off 11 years earlier A simple majority of voters to pass

14 Levy Lid Lift or GO Bonds G.O. Bonds Lower annual payment (1 st 9 years) Paid off in 2 years Require a 6% approval Require a 4% turnout from last general election

15 Annual Cost for Levy Lid Lift ($358, AV Home) Lid Lift (9 Years) GO Bonds (2 Years) $4 Million $72 $4 $6 Million $18 $6 $8 Million $144 $8

16 The Ballot 1. Ballot Date 1. August 6, 213 Primary 2. November 5, 213 General 3. Other 2. Voter Survey 1. Early 2. Later

17 Ballot Deadlines 213 and 214 Election Date Type of Election Deadline to File Resolution Election Estimated Cost Voters Pamphlet Voter Info Total Cost Apr. 23, 213 Special Mar. 8, 213 $16, $1,5 $3, $2,5 Aug. 6, 213 Primary May 1, 213 $1, $1,5 $3, $14,5 Nov. 5, 213 General Aug. 6, 213 $1, $1,5 $3, $14,5 Feb. 11, 214 Special Dec. 27, 213 $16, $1,5 $3, $2,5 Apr. 22, 214 Special Mar. 7, 214 $16, $1,5 $3, $2,5 Aug. 5, 214 Primary May 9, 214 $1, $1,5 $3, $14,5 Nov. 4, 214 General Aug. 5, 214 $1, $1,5 $3, $14,5

18 Historical Voter Turnout 29 through 212 Year Primary Election Votes General Election Votes 212 2,541 6, ,665 3, ,664 4, ,84 3,463 GO Bonds Potential Issue 4% Turnout = 2,441 votes Last 2 odd-year Primary Elections: 29: 1,84 211: 1, :?

19 Alternative Ballot Schedules Task APRIL 23, 213 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, 213 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, 213 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

20 Voter Survey Define purpose and timing of survey 1. Early in the process before incurring additional costs (use info to help decide whether to go to ballot, help structure measure,..) 2. Later in process to help decide whether (or which alternative) to place the matter on the ballot 3. No survey

21 Project Elements 1. Rehabilitation Level (C, D, or other) 2. Parking 3. Roof Park on parking lot deck 4. Special Fixtures/Equipment for specialized users 5. Other

22 Rehabilitation Options 1. Rehabilitation Levels presented 2/8/ Council expressed preference for C or D C : Base Rehab + New windows (meet Energy Code) D : Steel Frame with full interior/exterior restoration 3. Parking Lot required for all options Building/Demolition Costs Option Construction Costs Soft Costs Parking Lot Expansion (11 spaces) Total Estimated Project Costs Annual Operating $1/sf* A: Base Rehab $ 2,422,775 $ 969,11 $ 568,125 $ 3,96,1 $ 18,435 B: Base Rehab Plus $ 2,79,716 $ 1,83,886 $ 568,125 $ 4,361,727 $ 18,435 C: Base Rehab Plus + New Windows (Energy Code compliance) $ 3,4,71 $ 1,21,88 $ 568,125 $ 4,774,76 $ 18,435 D: Steel Frame Structure + Basic Int + Ext Restoration $ 3,561,316 $ 1,424,527 $ 568,125 $ 5,553,968 $ 18,435 E: Demolish Building - Replace with Parking (2+/- spaces) $ 28,6

23 Additional Project Elements 1. Landscaped roof deck over parking lot 2. Special user equipment/accommodations

24 PARKING EXPANSION

25

26

27 Rooftop Park Over Parking Examples

28 Special Accommodations/Equipment 1. Dependent upon tenants 2. Who would determine the accommodations? 3. How would the investment be repaid? 4. Who would be responsible for repairs and maintenance?

29 Operation of the Building 1. Who will manage the building? City, Non Profit, For Profit? 2. How will tenants be selected? 3. How will rents be set? 4. How will deficits be funded? 5. How will surpluses be used? 6. How will repairs be funded?

30 Brew Pub/Winery w/ Patio Storage/ Set Design Theatre

31 Tourism Center Wine Country Chamber of Commerce Economic Development Retail Tasting Rooms Wine Exhibit/History

32 Restaurant w/ Deck Dressing Room Theatre Multi Use Room

33 Decision Checklist THE BONDS 1. Tax Exempt or Taxable Tax Exempt Taxable Other 2. G.O. Bonds or Lid Lift Bonds G.O. Bonds Lid Lift Bonds Other THE BALLOT 1. Ballot Date Aug. 6, 213 Nov. 5, 213 Other 2. Voter Survey Early Later None PROJECT ELEMENTS 1. Level of Rehab Level C Level D Other 2. Parking Yes No Other 3. Park on Parking Deck Yes No Other 4. Special Fixtures/Equipment Yes No Other OPERATION OF THE BUILDING 1. By City of Woodinville Yes No 2. By Non Profit Yes No 3. By For Profit Yes No 4. How will Tenants be selected? 5. How will Rent Prices be set? 6. How will deficits be funded? 7. How will repairs be funded?

34 Summary 1. Are there any items that can be decided tonight? 1. Taxable v. Tax Exempt 2. GO Bond v. Lid Lift Bonds 3. August 6, 213 or November 5, 213 General 4. Purpose and timing of Survey 5. Level of Rehab 6. Rooftop park over parking 7. Special Features/Equipment 2. Items for future discussion 1. Operation of building 2. Tenant selection 3. Establishment of rent rates 4. Funding of repairs and maintenance 5. How will deficits/surpluses be handled