For years, the debt tied to Town Center made for contentious conversation in University Place. The city refinanced at the end of 2012 quieted some public displeasure but didn’t change the fact that Town Center accounts for 87 percent of the city’s total debt.
The city will make a $4 million payment this year and repay roughly $43 million over the next 23 years. Of that, nearly half is tied to the civic and library building considered the heart of Town Center.
But UP leaders say they’re no longer in panic mode.
“There isn’t any debt or crisis that’s hanging on this project at this point,” city attorney Steve Victor said.
Before the refinance, debt payments loomed over the city. Under the new structure, Victor said the city isn’t focused on how much debt is connected specifically to Town Center.
“The city doesn’t have any debt on the land,” Victor said. “It’s general debt, and it’s programmed to be paid off over the life of the project.”
Before the economic downturn, UP leaders believed the sale of property and future retail sales tax collections would repay Town Center debt. The city got in trouble when the recession halted the sale and development of the site.
In 2012, the City Council knew it couldn’t make a $12.4 million balloon interest payment due at the end of 2013. Around the same time the city’s credit rating was downgraded largely because of the Town Center debt.
Left with little choice, the council approved refinancing, which spread out payments until 2037. The city’s credit rating was soon upgraded.
Councilman Kent Keel was a newcomer to the council at the time of the debt restructuring and said he encouraged his peers to refinance in 2012 while interest rates were low.
Keel said the council made the only choice it could. “We can’t borrow money without paying it back; we knew we had to plan and pay for it,” he said.
The city’s debt repayment plan draws on the general fund, stormwater fees, real estate excise tax and arterial fuel tax. Money generated from Town Center land sales and eventual sales tax revenues will be used to build the city’s reserve account and maintain city services. But the council isn’t counting on that money until it’s in hand, Keel said.
Despite projected shortfalls in police and parks funding by the year 2016, Keel said pulling from the general fund to help repay Town Center debt isn’t a risk; it’s necessary to meet the city’s obligations.
“You play the hand you’re dealt,” he said.