Pierce County is examining two options to secure long-term financing to build an elite golf course in University Place. Both options depend on golf course and sewer revenues, while one also relies on general taxes.
The county's project manager, Tony Tipton, presented both options to the County Council's Rules and Operations Committee on Monday. The committee gives early review to budget and contract issues.
Tipton, a member of County Executive John Ladenburg's administration, said officials prefer the option that would issue bonds backed by golf course and sewer revenues, followed by property and sales tax revenues if needed.
Issuing that type of general obligation bond is the least expensive of the two options and would give bond purchasers the most security and the county the most flexibility "to ensure financial success, " Tipton said.
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Under this plan, the county would issue 30-year bonds and pledge golf course and sewer revenues and all other general county revenue sources to pay off the debt.
The second option leaves out general taxes. Instead, it would issue 30-year bonds and pledge to pay off the debt using golf course and sewer revenues, and bond insurance purchased by the county.
Both options raise about $18 million to build the golf course and cover the cost of issuing the bonds. Both also pledge golf course revenues as the primary source to repay the bonds.
To come up with the options, Tipton said, the county worked with its legal and financial advisers, including Foster Pepper & Shefelman and Bank of America.
It's up to the seven-member council - the county's legislative arm - to decide how to finance Ladenburg's proposal to build the proposed world-class, 18-hole Scottish links-style golf course at the 930-acre Chambers Creek Properties. The Chambers Bay Golf Course would unfold over 250 acres. It is intended to reclaim a former gravel pit, enable expansion of the county's wastewater treatment facilities and pump up the local economy.
One difference between the two options Tipton presented Monday is how much the county would pay in principal and interest over 30 years.
Under the plan that includes general taxes, the county would pay $34.6 million in debt service - roughly $426,000 less than the $35.03 million it would pay if it pledged only golf course and sewer revenues to pay off the debt to build the golf course. The reason for the lower debt service is partly because it comes with a lower interest rate.
Councilman Tim Farrell (D-Tacoma) said he leaned toward pledging only golf course and sewer revenues. That way, the general taxpayer would be off the hook, even though it costs a little more to pay off the bonds.
Councilman Dick Muri (R-Steilacoom), one of two council members who voted in May 2004 against publicly financing the project, said the county's sewer ratepayers shouldn't get hit if the golf course fails.
"If there is a deficit, the whole county should step up to the plate, " he said.
Council members also peppered Tipton with questions. Muri asked how much revenue the golf course would generate from greens fees.
Tipton said he did not have updated golf course revenues for Monday's meeting, which focused on long-term financing options. In an interview after Monday's meeting, Tipton said he would present updated greens fees and other revenue information at future meetings.
Tipton said greens fees are a moving target and that the county will discuss them right up until the golf course's expected opening in May 2007.
By August, county officials expect to bring an ordinance to the council to approve the sale of bonds to build the golf course. The county hopes to begin construction in the fall.
The sale of bonds would raise an estimated $18 million, which would cover the estimated $17 million the county would need to construct the golf course, as well as costs associated with the sale of the bonds.
However, the bond proceeds would not cover roughly $3 million in trail and open-space amenities, and start-up costs that are planned as part of the golf course project.
The county would pay for those amenities and other costs out of its sewer utility fund.