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Council approves first reading to authorize general obligation bonds for public safety building improvements
Summary
Council gave first reading approval to an ordinance authorizing issuance of general obligation bonds to fund tenant improvements for a leased public safety facility; staff said closing is targeted for late June–early July.
The Puyallup City Council on March 25 approved on first reading an ordinance authorizing the issuance of general obligation bonds to finance tenant improvements for a public safety building the city plans to lease from a private owner.
Barbara Lopez, finance director, said the ordinance is the foundational approval the city needs to proceed; the plan is to close on the bonds in late June or early July so construction funds will be available when work begins. Lopez said the city budget used a 5.5% interest assumption for tax‑exempt bonds and that current market rates were running near 4.75% at the time of the meeting. She warned that if the bonds were required to be issued as taxable debt (a possibility under federal tax changes under discussion in Congress), additional budgetary gap — on the order of roughly $100,000 — could arise.
Deanna Gregory of Pacifica Law Group, acting as bond counsel, gave a legal overview of municipal bonds under Washington law and federal tax rules. She explained the ordinance contains delegation parameters (section 10) allowing the city manager or finance director to finalize terms within limits the council set, including a maximum aggregate principal amount for the new money portion not to exceed $25 million and an expiration of the delegation one year after the ordinance’s effective date. Gregory said the team expects the bonds to be issued on a tax‑exempt basis and that they had reviewed the leasehold improvements for compliance with federal tax law restrictions on private business use.
Councilmember Witte asked what rate the council had budgeted; Lopez reiterated the 5.5% budgeting assumption and said tax‑exempt yields at the time were about 4.75%, keeping the project within budget if bonds remained tax‑exempt. Councilmember Babbler and others noted the ongoing federal discussion about the future of tax‑exempt municipal bonds; councilmembers asked staff to keep monitoring the federal landscape and to report back when bonds are sold and closed.
The ordinance passed on first reading and will return for a required second reading at a later meeting.
