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Battle Ground eyes federal bonds for road project

Scotton Way work seen as economic development tool

By Marissa Harshman, Columbian Health Reporter
Published: November 10, 2010, 12:00am

The city of Battle Ground is cautiously moving forward with a plan to use federal bonds to extend Scotton Way and spur economic development.

The city plans to partner with two property owners at Scotton Way and state Highway 503 to extend the street west to Southwest 20th Avenue. The project also relies on the Washington State Department of Transportation granting an access break on Highway 503 and installing a traffic signal.

The project would provide an access route to the developers’ properties and city park land and create an east-west arterial the city has long desired but struggled to fund.

“Being able to utilize the recovery zone bonds would be the most cost-effective way for the city to move forward with this,” Community Development Director Robert Maul said.

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The city council voted unanimously last week to declare the city a “recovery zone” based on its unemployment rate. The designation was necessary for the city to issue Recovery Zone Economic Development Bonds allocated by the state Department of Commerce.

The recovery bonds are a tool used to finance municipal projects and were created by the 2009 American Recovery and Reinvestment Act. The taxable bonds provide a direct federal interest subsidy to the city. In this case 45 percent of the interest is paid by the U.S. Treasury Department.

The federal government allocated $4.28 million in recovery bonds to the city. The funds were previously allocated to the city of Vancouver and Clark County but were not used. The total project cost is expected to be about $4.85 million, with the difference to made up with limited general obligation bonds.

The subsidy means the city’s debt service for the bonds — principal and interest — only includes 55 percent of the interest. Based on interest rates from early October, the city’s debt service is estimated to be about $6.8 million.

The proposed development agreement divides the debt service payments between the city and two developers with each developer paying 25 percent and the city paying 50 percent. The payment plan will continue until the properties are fully developed and revenue-generating, at which time the property and sales taxes from the two properties are expected to cover the entire payment, Finance Director Catherine Huber Nickerson said. The city expects to pay off the 20-year bonds within nine years, she said.

The two properties are on the west side of Highway 503. One 18-acre property is owned by CJ Dens; the other, at 40 acres, is owned by Mill Creek Partnership. Both properties are zoned for retail and services businesses, Maul said.

According to an economic study commissioned by the developers, complete project build-out and occupancy could create about 700 year-round jobs. The study estimated ongoing tax revenues to the city to be about $805,400 per year, which includes sales and property taxes.

At last week’s meeting, the city council voted to move forward with the agreement and approved issuing no more than $5.2 million in bonds. Several council members voiced concerns about the project, particularly the potential risk to the city. Councilman Paul Zandamela was the only member to oppose both actions.

Huber Nickerson explained the city would not be liable for the debt until the bonds are sold, which is scheduled to take place Dec. 8. The ordinance also requires the development agreement be signed before the bonds are sold, she said. City staff expects to have the development agreement finalized and signed by the developers by the council’s Monday meeting.

Public Works Director Scott Sawyer said the city has received a letter from DOT outlining the steps the city needs to take in order to obtain the highway break, which is vital to the project, but has not been guaranteed the access.

At any time before the bonds are sold, the council can back out, Huber Nickerson said.

The city council will hold a workshop at 6 p.m. Monday to review the finalized development agreement before voting to approve it during the regular meeting that begins at 7 p.m.

Marissa Harshman: 360-735-4546 or marissa.harshman@columbian.com.

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Columbian Health Reporter