Lynnwood may save $675K on ratings upgrade

  • Tue Feb 14th, 2012 6:53pm

By Mina Williams Herald writer

LYNNWOOD — The city of Lynnwood stands to save $675,000 on the financing of its Recreation Center renovation.

This savings comes as the city’s financial outlook was upgraded to A+ and designated the city’s creditworthiness as “stable” as bonds were offered for sale Feb. 13.

These bonds are designed to put into place the financing package for the Rec Center project. Previously the city’s rating was A+ with a negative outlook.

The boosted rating, given by Standard &Poor’s a bond rating firm, has reduced the cost of borrowing money for Lynnwood. Bonds were offered at 3.63 percent. Yields ranged from .58 percent on the 2013 maturity to 4.12 percent on bonds maturing in 2037.

Insuring the bonds further boosted their attractiveness for investors and contributed to the city getting a better interest rate.

The City Council approved the plan Feb. 13 during its regular meeting.

“Getting this credit rating stabilized is huge for our city and for our future,” said Van AuBuchon, councilmember.

Lynnwood’s financial standing changed as the city took action to address its financial situation, according to the firm’s report. S&P specifically cited Lynnwood’s proactive position with budget adjustments to align revenues with expenditures. Those moves boosted the city’s general fund to strong levels.

City officials implemented a 5.5 percent reduction in expenses and actively addressed revenue shortfalls, financial policies were revised and a long term financial plan was instituted.

“Those moves influenced the rating, but the rating is about more than just money,” said Lorenzo Hines, Lynnwood’s financial director. “It sends a signal to developers, business owners and our citizens that we are a viable community with a viable government.”

Lynnwood’s payments for the bonds will be $1 million to $1.7 million annually over 25 years starting this year.

The Rec Center construction project was initially financed through a $25 million short term line of credit with U.S. Bank. That is set to expire March 1.

Most civic capital improvement projects are financed in this fashion, Hines said. Bonds are issued when a project’s actual final costs are realized. Generally that is only upon completion.

The former Rec Center was also financed through 20 year bonds issued in 1977.

Bond proceeds can only be applied to capital purposes, said Williams Tonkin, an attorney with Seattle-based Foster Pepper, the city bond counsel. Operating expenses cannot be paid for with bond money.

According to Hines, Rec Center revenues are expected to meet the city’s $1.8 million annual projection.