Peoria approves up to $41M to patent PIC 2 land, seeks refinancing to cut interest costs
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Summary
Council approved a budget appropriation not to exceed $41 million to complete patent (purchase) of remaining PIC 2 state land; staff said state financing accrues interest and refinancing to government rates could cut interest roughly in half, with projected savings around $7 million over 10 years under current assumptions.
Peoria City Council voted unanimously on Feb. 10 to approve agenda item 29R, authorizing a budget appropriation not to exceed $41,000,000 to complete the patenting (purchase) of remaining Peoria Innovation Corps (PIC 2) state land. Deputy City Manager Kevin Burke explained the mechanics of Arizona State Land Department (ASLD) transactions and why the city sought authority to complete the purchase now and pursue refinancing to lower interest costs.
Burke said Peoria was the successful bidder for 834 acres of PIC 2 land at a stated bid price of $46,700,000 and had made the required 10% down payment at auction. Under ASLD procedures described on the record, interest accrues on the unpaid balance until the city completes the patent transaction and pays off the state's note. Staff noted the ASLD option offered different interest calculations; the city chose a SOFR-based option for prior steps but plans to refinance to government debt rates to lower long-term interest costs.
"When we patented the 144 acres associated with Amcor, our interest rate was 8.8%. In our market right now, we're probably more getting about 4 and a half," Burke said, explaining that refinancing government debt could roughly cut interest expense in half. Burke presented a working example that, holding assumptions stable, the refinancing could save about $7,000,000 over a 10-year period.
Council discussion included clarifying where interest is charged and confirmation that, in previous quick-turn resale transactions, the city paid accrued interest to the state at the time of resale. Burke said the patent transaction was likely to be completed in March and that staff would return with refined financing options.
A motion to approve item 29R was moved, seconded and approved by voice vote; the chair announced the motion passed seven-zero.
