Council committee briefed on early repayment of 2014 LTGO bonds tied to Aurora Stone site

Seattle budget and finance staff briefed the Finance, Native Communities and Tribal Governments Committee on May 21 on a proposal to redeem the callable portion of limited-tax general obligation (LTGO) bonds issued in 2014 to acquire a property known as Aurora Stone in North Seattle.

Dan Eder, interim director of the City Budget Office, said the 2014 issuance originally totaled $6.7 million for acquisition of the site. "Paying off the bonds will end the debt service. This will save the city approximately $75,000 annually in interest payments," Eder said, while noting the outstanding principal on the callable bonds is about $3.4 million.

Jamie Carnell, director of the Office of City Finance, and staff from the city's debt-management team told the committee the plan is to appropriate funds now to redeem the remaining principal and a modest accrued interest amount. Staff identified about $1.9 million in interest earnings in past taxable bond funds (2017–2021), roughly $1.3 million in the unrestricted cumulative reserve fund, and about $300,000 in real-estate-excise-tax (REET) capital funds as sources to cover the redemption.

Why it matters: Redeeming the bonds would end the scheduled debt service tied to the Aurora Stone bonds, which staff said would reduce pressure on REET capital funds and nominally save about $675,000 in interest over the remaining life of the bonds through 2034. Eder and Carnell said the funds identified are restricted to capital projects or the specific uses allowed under bond covenants and that redeeming the bonds is an allowable use of the interest earnings identified.

Council members asked how redeeming the bonds affects options for the property. Eder and council members said the city could still pursue municipal uses (including a new or expanded North Precinct), sell the property, or continue interim private leases. Council member Kettle urged that the property be considered for a replacement North Precinct; Vice Chair Rivera requested early notification if the executive identifies a use so council can be involved.

Public comment tied into the topic: David Hanks, the lone registered public commenter, criticized the issuance of bonds in 2014, saying, "Just look at the bonds that were issued in 02/2014. It was more like another favor for big bank donors." His remarks were part of the public-comment period and were not offered as a formal fiscal analysis by staff.

Next steps: Staff said the committee will consider ordinance language in the Select Budget Committee on June 4 and the council will consider final action thereafter. No votes were taken on May 21; the item was presented as a briefing and discussion.