Renovating the rec center

LYNNWOOD

A renovated recreation center is coming.

On that note, the City Council’s unanimous.

But a big, unresolved questions remains: how to pay for it.

In meetings scheduled for July 7 and 16, the council will review spring recreation center outreach efforts that sought citizen input.

And it’ll be briefed on specific financing options by John Moir, the city’s finance director.

Paying for the recreation center renovation and expansion is just one of many capital projects the council will look at closely in the coming months as it zeroes-in on the 2009-10 two-year budget.

Under a time line it signed off on in February, the council was to reach a consensus on how to pay for the recreation center renovation and expansion by August, after which staff would begin the design planning.

The recommendation put forth by city staff is to fix what’s broken and inadequate, something the city has to do anyway, plus expand the aquatics facilities at an estimated cost of $22 million. That’s been dubbed “phase 1.”

After that, there’s a $35 million expansion that would add a new gymnasium and other amenities, including a senior center, to a much expanded recreation center by 2013. That’s “phase 2.”

City staff and a city-hired consultant have recommended the council finance both phases in two chunks.

Under that recommendation, the first chunk would be handled this year, through issuance of council-authorized municipal bonds so staff can get right to work planning and permitting construction that would begin next year and end in late 2010.

Then, after the city’s finished annexing the areas it wants to bring in next year, residents would vote on whether to raise their property taxes to cover the $35 million for phase 2. That’s the idea, anyway. The council has yet to decide whether to go that route.

That $22 million for phase 1 isn’t just sitting around somewhere, waiting to be spent in one chunk, however. The city will have to borrow it and repay it over time, Moir said.

Those bonds, which are held by investors who loan the city money, must eventually be paid off — or “retired” — and part of the council’s task in July will be to mull over whether it’s worth doing that and how to pay off the bonds.

Municipal bonds paid for construction of the 30-year-old recreation center in the 1970s. Those bonds have since been paid off.

Moir said one of the options he’ll offer council members next month is to increase utility taxes 2.5 percent over two years in 2008 and 2009. That would raise about $1.9 million a year. The tax increase would be split in half, so residents would see a 1.25 percent increase the first year and a 1.25 percent increase the second year, he said.

“That would cover the debt service on the bonds to be issued for the rec center,” he said.

He figures with bond interest rates of about 5 percent, annual debt payments would total about $1.9 million over 20 years.

Another option, he said, could be to shift some money from the general fund to the capital fund and earmark it for partial debt repayment. This could be augmented by using the money made available as the city’s existing debt is paid off.

Earlier this year, Moir presented the council with a list of capital projects and their projected expenses from 2009 through 2014.

Those projects, which include a host of transportation projects, city hall, police and jail renovations as well as both phases of recreation center expansion, total nearly $165 million.

If the council has an ace in the hole it is this: Compared to many Snohomish County cities, Lynnwood has a considerable amount of remaining taxing authority, which in layman’s terms means its taxes are low and there’s room for increases.

For example, the city has only used $6.9 million of its $78 million in non-voter approved bonding authority. Its 2007 property tax levy rate of $8.79 per $1,000 of assessed value was the fourth lowest countywide. And the City does not use its utility tax authority except for a 3 percent telephone tax. Most cities in Washington are at the legal maximum of 6 percent for utility taxes, Moir said.

Those are issues the council will take a close look at.

“They have a lot of options now,” Moir said, adding, “There’s not enough non-voted debt capacity to do all these projects, so we’ll have to have at least one referendum if the Council wants to proceed with the recreation center expansion or the new justice center.”

One skeptic on the council is Jim Smith. He said he’s concerned the city has underplayed the true cost of the two-phased recreation center revamp.

“I think people agree we need to do something,” he said. But the $22 million renovation and partial expansion of phase 1 “is just the tip of the iceberg.”

He said that’s because operating expenses for the new recreation center are expected to increase, too, according to a report by a city consultant. That report estimated the city would recover about 78 percent of the new annual expenses through increased use and fees.