The city must now sell bonds to reimburse itself for the purchase of property formally known as Monson Ranches Feedlot, now renamed West Sunnyside Business Park. The bonds will also be used to make water and sewer improvements to the property.
Before receiving unanimous approval from the council to proceed, City Manager Bob Stockwell told the council last night city staff thought the city had sufficient unencumbered fund balances to cover the purchase price without impacting any needed cash reserves. City council, however, adopted a resolution in 2004 which provided a mechanism to finance or reimburse the cost of the purchase by issuing revenue bonds.
Stockwell's staff expected proceeds from the eventual sale of the property would reimburse the various funds, with interest, and cover the city's cost of extending water and sewer services.
Stockwell told the council the Washington State Auditor's office stated this was not an allowable use and the use of city funds to purchase the property is viewed as an internal loan and should be listed as a liability, not an asset.
The current cash position the city finds itself in requires it to proceed with the selling of bonds to reimburse the purchase.
The bonds will total approximately $2.8 million, which will include the original property purchase price plus interest accrued for the funds that provided the internal loan. Stockwell said the estimated annual payment will be $236,000. Because the bonds will reimburse the purchase price, all bond proceeds will be invested in the city's pooled investments and generate approximately $140,000 in interest each year. This money will fully cover the bond interest and a portion of the principal payment each year.
Utility revenue bonds will also be sold to pay for extending water and sewer service to the business park. Stockwell said once the business park is served by water and sewer, the market value of the property would exceed the cost of the land purchase and interest, and cover installation of water and sewer services.
Cost of the project is estimated at $2 million but the actual bond would be $2.3 million to satisfy bond requirements that one year's principal and interest be set aside in reserve.
The $2.3 million will be invested until the project is completed. This will generate an estimated $120,000 in annual interest and cover the bond interest payments.