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Council OKs bond plan to relocate City Hall


Utility franchise fees to pay for private bonds in remodeling building

With a lone councilor opposed, the Beaverton City Council on Tuesday night authorized financing with $7 million in revenue bonds a move of city government’s administrative offices from their longtime home at 4755 S.W. Griffith Drive to the city-owned South Office Building at The Round at Beaverton Central.

Using revenue bonds paid for through utility franchise fees the city collects as opposed to property tax-based public bonds — a strategy the council considered earlier this year — the approach removes city voters from the equation.

Up to $7 million in private revenue bonds will be sold to pay for the move, including remodeling of the first, fourth and fifth floors of the five-story building at 12725 S.W. Millkan Way. Up to $1.2 million will go toward reimbursing $8.65 million removed from the city’s contingency fund last spring to purchase the 108,000-square-foot building. Once City Hall is moved in, as early as a year from now, city officials said the remaining floors of the building would continue to be rented to private-sector tenants.

Space and spending

While all five councilors backed a resolution providing $200,000 for the building’s architectural design and planning, City Councilor Betty Bode withheld her support for the larger $7 million sum to fuel remodeling and moving costs, casting the sole dissenting vote.

“I am unable to support this motion for a variety of reasons,” she said, noting earlier discussions that moving City Hall to The Round could cost as little as $3 million. “Is it a core function of a municipality, when not in a disaster, to go out and to take a loan and build and have another footprint? I don’t think we are being wise fiscally by using revenue bonds. We had a year and didn’t save any money. It was just spending and spending.”

The move is part of a complex plan to alleviate growing space and safety concerns in the overcrowded former bank building on Griffith Drive, which has housed city government, police and courts since the early 1980s. The current approach calls for police and courts to remain on Griffith Drive in either a renovated or new public safety facility. The council plans to refine funding and logistics of that plan later this year.

Moving city administrative offices to the South Office Building was the intention of some councilors in March 2012, when the opportunity arose to purchase it for $8.65 million, well below its appraised market value of $17.5 million. But the initial selling point was an opportunity to extract the city from a 33-year lease on space housing the city-owned Central Plant. Currently operating at one-third of its capacity, the first-floor operation supplies heating, cooling and hot water to properties at The Round.

The touted savings of $13.3 million in rent payments through buying the building for $8.65 million is now offset by the $5.7 million cost to remodel the building and move city administration from Griffith Drive. However, Assistant Finance Director Dave Waffle said the investment plan still makes solid financial sense.

“There’s the acquisition cost, plus the improvement value, and we’re still not paying what we would’ve been, $13 million to the owner of the building in third-party leases to the Central Plant over the life of the lease,” he said on Monday. “That’s still the cost we’re avoiding.”

Harnessing the three-fourths unused capacity of the Central Plant — along with payments from existing and future tenants — will further offset the building purchase and City Hall moving costs.

“We hope out of this we’ll get additional development at The Round, and use some of the Central Plant’s unused capacity, which is pure revenue for us,” Waffle said. “If some new buildings come on line, plus rent from tenants, we could bring in $700,000 or $800,000 a year.”

Mayor Denny Doyle estimated the city receives $37,000 a month per floor in rent and fees from building tenants. The second and third floors have gone from 40 percent to more than 70 percent occupied in a little more than a year, he said.

Of the moment

Bode questioned the wisdom of the city borrowing millions of dollars for a new City Hall, particularly while bonds for the Central Plant have yet to be paid off.

“That’s a phenomenal rental agreement for the Central Plant, but we have not paid for the Central Plant,” she said. “It won’t be paid off until 2022. There’s a water bond out there and a variety of things. I don’t think we’re as flush as we like to think we are.”

Councilor Marc San Soucie countered that borrowing money is a reasonable, conventional move for a municipality on solid financial ground.

“Nobody pays cash up front in the real real estate world for a project,” he said, noting financing is beneficial to taxpayers. “There’s always finance associated with these things ... Now we’re using a very robust, proven and sensible financing mechanism ... While I understand your point. I simply can’t agree with you.”

Noting the building purchase did not deplete the city’s contingency fund, Councilor Mark Fagin said the arrangement is a solid approach to solving a long-standing space, safety and efficiency problem.

“Right now we have in front of us an opportunity to do the right thing for the city,” he said. “It is a prudent use of taxpayer dollars. This is the way we’re going to make it happen, and the time is right to do it.”

For additional information, visit beavertonoregon.gov/RoundFAQs.

Bonds, revenue bonds

Unlike general obligation bonds — essentially a line of credit that requires voter approval — revenue bonds can be issued quicker, with only a 60-day public notice required and an interest rate less than 2 percent over seven years.

The city earns at least $4 million each year from franchise fees charged to utilities such as Northwest Natural Gas, Portland General Electric, and cable and telephone companies for rights of way through city property, said Dave Waffle, the city’s assistant finance director.

Once the precise costs of remodeling the building are determined later this year, tax-exempt revenue bonds would be sold privately through KeyBank, with about $1 million in franchise fees going toward bond repayment over seven years.

“We’ll actually close the transaction sometime this fall,” Waffle said, noting the architectural design process will take about four months. “We’ll start the next day, as soon as the contract is signed.”