Delay of sale puts Monroe in a bind

Published 9:49 pm Tuesday, June 29, 2010

MONROE — A big-box store might face another delay in its arrival as a Seattle developer expects to miss a deadline today to buy land from the city.

The holdup to the $9.6 million deal could complicate the budget for Monroe city officials, who want to use money from the sale to pay off a multimillion-dollar property loan.

Sabey Corp. wants to bring a retailer like Wal-Mart or Costco to the vacant 24-acre lot on North Kelsey Street. However, the company is still working on a plan to develop the land.

Sabey remains interested in the site, but plans to let today’s deadline pass, said Mike Hansen, vice president of property operations for the developer.

“We’re on the same page with the city on this,” Hansen said.

The sale may be delayed by months, Mayor Robert Zimmerman said. He doubts it will close before the $11.27 million loan used by the city to purchase a nearby piece of land comes due on Oct. 25.

“That’s going to have an impact on our budget,” Zimmerman said. “As a result, we’re going to have to make some pretty tough decisions.”

Land along North Kelsey Street has become an albatross for city officials. The loan it used to buy property on the south side of the street has cost the city $2.33 million in interest payments so far. With the sale on the north side seemingly delayed, costs may climb.

City officials are considering their options to deal with that burden. Tax increases are an option. So is renegotiating union contracts.

In 2005, the city bought land along North Kelsey Street for $16.1 million from Snohomish County. City officials saw it as a way to attract business and increase the tax base.

At first, the plan worked. Lowe’s opened a home improvement store along the block in 2007.

After that early success, however, the land gathered dust.

The city may need to refinance its loan or issue bonds to deal with the problem in the short term. Meanwhile, the financial burden will remain.

“We are victims of a national great recession, and we’re also victims of some failures in recent years to develop this property,” Zimmerman said.

The city uses money from past land sales to cover its interest payments, Monroe operations director Brad Feilberg said. However, that pool of money may run dry next year.

For help, officials could tap into the general fund, which pays for services such as the police department and city administration. The $10.7 million spending plan is already under pressure, on pace to end the year with just $20,000.

City officials want to give the general fund breathing room in case it needs to shoulder the loan.

Cutting labor costs is one option. Right now, those are outpacing revenue thanks to healthy raises negotiated in 2007 with city unions.

Zimmerman and some council members want to cut back the raises. Councilman Tony Balk said contract renegotiations are necessary. He also feels the city needs to attract business and possibly raise taxes.

“That will give us a good foundation to deal with our budget, not only next year, but for the long-term future,” he said.

The greatest relief may come when the city sells its land and pays off its loan.

“That debt drives so many other decisions,” Balk said.

That sale still could happen.

Police Chief Tim Quenzer is Monroe’s point man with Sabey. The developer approached the city while he was interim city administrator.

Quenzer said Sabey won’t purchase the land until it has a tenant on the hook. The developer is in talks with at least one retailer, but hasn’t firmed anything up. Quenzer declined to name the store, citing the fragile nature of real estate negotiations.

Sabey continues to spend money on engineering work for the property — a good sign, Quenzer said.

“This isn’t a lost cause by any means,” he said. “In fact, it’s a work in progress.”

Andy Rathbun: 425-339-3455; arathbun@heraldnet.com