SEQUIM –– Volatility in bond markets has city officials watching financial indexes closely as they prepare to possibly issue up to $11 million in bonds to build a new City Hall and police station.
The City Council unanimously agreed to decide on issuing bonds for the project at its next regular meeting July 22 after hearing nothing from the public in a hearing Monday night.
Administrative Service Director Elray Konkel said the bonds would be the first general obligation bonds the city has issued in its 100-year history.
Konkel, Mayor Ken Hays, City Manager Steve Burkett, Police Chief Bill Dickinson and the city’s financial adviser, Seattle Northwest Security, will travel to San Francisco to get a bond rating from Standard & Poor’s on Friday morning.
“Since we haven’t been in the market, it is really important for them to see our face and hear our story,” Konkel said.
Rates going up
Konkel told the council Monday night that the bonds are going to cost more than originally anticipated but that the city should still be able to afford the $15 million building despite higher interest rates.
“We’re in a very, very solid financial situation,” Konkel said. “We have a very, very viable financial future.”
Interest rates on municipal bonds surged, he said, with rates up 0.91 percent over the past month, a cost of about $76,000 on an $11 million bond issue.
“In our organization, that’s a full-time employee,” Konkel said. “If we would have moved forward with this project a year ago, we would have saved $100,000.”
Konkel said the rate still will be good. It will just be at last year’s lows.
“It’s still overall at historic lows, so we’re not in terrible shape,” Konkel said. “The market is what it is.”
Payment plan
Annual payments for the bonds will stay below $600,000, Konkel said.
If interest rates increase costs, the project will be scaled back, Burkett said.
The city already has reduced the scale of the building from early designs, Burkett said.
He noted that among the items cut was a firing range that the police chief requested.
The existing City Hall likely will be used as storage space for the new municipal building.
“It could all look like a new building on the facade, though,” Burkett said.
“It will just be the old building inside.”
Konkel said a new City Hall will save the city $200,000 annually by eliminating rent it now pays for such offices as the police station inside the Sequim Village Shopping Center at 609 W. Washington St.
He added that revenue streams — such as a public safety sales tax that voters approved last year and real estate excise taxes — will be used, both combining for more than $350,000.
In 2007, the city set aside $1 million for the new municipal building.
The city also has saved more than $800,000 in revenue from real estate excise taxes, Konkel said.
Konkel said the plan is to spend another $1 million from the city’s cash reserves
Revenue from sales taxes through the first half of the year is exceeding projections by 6 percent, he said, adding that spending by various departments is 5 percent below budget.
The City Council meets at 6 p.m. the second and fourth Monday of each month at the Sequim Transit Center, 190 W. Cedar St.
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Sequim-Dungeness Valley Editor Joe Smillie can be reached at 360-681-2390, ext. 5052, or at jsmillie@peninsuladailynews.com.