The story is known widely in University Place: The city owes tens of millions of dollars on its stalled Town Center project. It can’t take on more debt without voter approval. It laid off more than a quarter of its employees heading into 2010 to pay down debt and cope with shrinking revenues.
The story, which is true, has led some of UP’s 31,000 residents to make an assumption that their leaders say is false: The 16-year-old city is going broke. City staff and City Council candidates on the campaign trail say they’ve heard such comments.
University Place officials are making an effort to thwart the perception, a process deputy city manager Eric Faison has likened to “fighting a ghost.”
This week, City Hall rolled out a recent report from a prominent credit rating agency that characterized the city’s financial position “to still be strong.”
City Manager Steve Sugg held a town hall meeting in June centered on easing concerns about city finances. His first question to the audience was how many people had heard the city was going broke. Many raised their hands.
Sugg stressed to people in the room that the city has a debt-reduction plan and can maintain current services without counting on revenue from Town Center land sales or depleting reserves.
“We wanted to squash the rumors because they were false,” Sugg said this week. “If people want to know the status of the city’s finances, they can call us. They can look on the website.”
The debt-reduction plan calls for paying between $2 million and $4 million a year before exhausting the debt in 2034. The city owes $51 million from buying Windmill Village, the current location of City Hall, constructing parks and streets and developing Town Center. The bulk of the debt stems from Town Center.
Posted on the city’s website this week is a report from Standard & Poor’s that affirmed an A+ rating – two levels below its prime AAA rating – for two bonds the city issued in 2009 to pay for construction of the civic and library building. Faison said the basis of the rating is the city’s overall credit worthiness.
The report noted the community’s above-average household income level and City Hall’s strong management practices. Concerns included the city’s moderate to high debt burden and costs associated with holding onto the Town Center properties.
“The stable outlook reflects our view that the city’s still-strong financial position allows it to respond to additional revenue pressures associated with the current economic trough,” it said.
However, the report said it could lower the rating if Town Center-related costs put additional strain on the city’s budget.
“It validates what we have been saying, and we had nothing to do with that report,” said Sugg, who learned of the Aug. 15 report while on vacation and directed staff to issue a news release upon his return. The release was issued Tuesday.
The city didn’t issue a press release in June when Standard & Poor’s gave an A- rating to more than $5 million in bonds sold by an independent authority created and managed by the City Council. The bonds will pay for additional improvements to Town Center and will be repaid with a portion of the state sales tax diverted to the city.
The bonds are “backed by a limited resource that is more volatile, versus the general full faith and credit of the city,” Faison explained.
Greg Noronha, a finance professor at University of Washington Tacoma, said a lot of cities see a downgrade in their credit ratings during a poor economy because the decline in tax revenue makes it harder to pay debt. Maintaining an A+ rating in such an environment enables UP officials to make the argument they’re being fiscally responsible, he said.
“While it’s not the highest possible rating, it’s a good rating,” Noronha said.
Credit ratings have generated a lot of interest recently because of Standard & Poor’s downgrade of the nation’s rating. Locally, the agency downgraded bonds issued by the City of Tacoma to renovate Union Station. Those bonds are now rated at AA+, a level higher than UP’s.
City Council candidates said Town Center tops the concerns they’ve heard from UP residents while canvassing neighborhoods before this fall’s election. Residents worry that the long-planned mixed-use development on Bridgeport Way has no commercial tenants, and they’re concerned about the amount of debt the city took on to develop it.
Six candidates are vying for three council seats leading up to the Nov. 8 election.
“They’re tired,” candidate Chris Nye said of the city’s residents. “They want to get (Town Center) done.”
Candidates said they have heard comments about the city heading into bankruptcy or being unable to pay bills. The frequency has tapered off compared to earlier this year, they said.
Ken Campbell, who’s running against Nye, said it’s understandable that the city would strive to get out positive news about its finances.
“Some of that could be the best defense is a good offense,” he said.
Christian Hill: 253-274-7390 christian.hill@thenewstribune.com blog.thenewstribune.com/street
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