Council approves funding appropriation for eminent domain purchase of adjacent commercial building

The Mercer Island City Council on July 15 voted to appropriate the budgeted funding needed to complete acquisition of a commercial property identified for municipal use and scheduled a second reading of a financing ordinance for autumn.

Finance Director Matt Morgan told the council staff had authority from a June 17 action to acquire the commercial building at 9655 Southeast 30th Street by eminent domain and that the estimated purchase and closing costs total $9,080,000. “Once we include the cost to finalize the purchase, including title insurance, transferring the title and escrow fee, the total cost to the city is estimated to be $9,080,000,” Morgan said. City materials described the property as adjacent to City Hall and intended to house community planning and development, public works administration, engineering teams and youth and family services.

Council approved a schedule for a second reading and adoption of Ordinance No. 25-21, which would authorize staff to issue limited tax general obligation (LTGO) bonds; staff said they plan to pursue $1,600,000 in outside financing to help fund the purchase. The ordinance limits LTGO terms to a maximum of 20 years and sets a true interest cost cap of 6.25 percent as an upper bound for planning; staff said current market rates were roughly 4.5–5.55 percent.

Council then approved by roll call a motion to appropriate the following available budget resources to the municipal facility replacement fund for acquisition by eminent domain: $3,302,358 from general fund unassigned fund balance; $3,360,000 from the municipal facility replacement fund; $1,670,752 from the capital improvement fund unassigned balance; and $744,082 from the Town Center parking facilities fund — a combined total of $9,080,000. The motion carried on unanimous voice roll calls.

Councilmember Craig Reynolds asked whether closing costs that vary from the estimate would require a return to council for further appropriation; outside counsel advised the council an additional appropriation would be required if costs exceeded the appropriation. Morgan said the non-financing closing costs were effectively fixed at that point.

Staff indicated funds will be deposited into escrow as required by eminent domain process and estimated city possession of the building in fall 2025. Ordinance No. 25-21 was scheduled for second reading on Sept. 2; the appropriation motion passed at the July 15 meeting.