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Council hears options to fund Gracie Lane obligation; staff recommends short-term tax note
Summary
Staff and the city's financial adviser outlined options to satisfy a Gracie Lane development obligation, recommending a two-year tax note and a competitive open-market sale; council members asked about interest costs versus using cash and staff will return with bids on May 6.
Staff introduced Item 5b as a follow-up to a development agreement approved in January 2025 concerning upgrades related to the Gracie Lane project and said the city has several options to fulfill the obligation, including paying cash or issuing a tax note. Staff said they were not recommending paying cash and proposed a short-term tax note.
Dan Wegner of Specialized Public Finance described a timeline and structure for limited tax notes, saying the open market would likely produce attractive competitive bids given the city's strong AA+ credit position. Wegner said the next steps were to seek rating affirmation (AA+), solicit bids, return to council with bids on May 6 and, if approved, close within about three weeks to deliver proceeds.
A council member asked whether issuing a note would require paying interest and whether keeping cash invested would earn more than the borrowing cost. Staff and the financial adviser responded that the city would pay interest on a note (Wegner cited a projected rate around 3%) and that whether to borrow or use cash depends on current investment returns versus the note rate; staff said in many cases keeping cash could be financially healthier.
No motion was made at tonight's meeting; staff will return with formal bids for council consideration on May 6 as part of the proposed timeline.
