The city of University Place successfully refinanced Wednesday debt owed on its Town Center mixed-use project and Cirque Park.
The city had to make a $12.4 million principal payment on a portion of the Town Center debt by December 2013, but the refinancing breaks that payment into installments over the next 25 years. State auditors had concluded University Place didn’t have the money to make the balloon payment.
University Place also refinanced $1.8 million it owes on debt issued to develop Cirque Park to take advantage of lower interest rates. The Cirque Park debt will be retired in nine years.
Finance Director Eric Faison said the refinancing shows the city is on a stable financial footing.
The city has been making interest-only payments of about $705,000 on that Town Center debt, and interest and principal payments of about $239,000 on the Cirque Park bonds, totalling $944,000 a year.
The combined payments will increase to about $1.1 million following refinancing. Although the city will be paying less in interest, the total payment will increase because University Place is paying down principal on the Town Center debt. The average interest paid on both debts will drop to 4.42 percent from 5.67 percent.
It’s the second time the city has refinanced the money it borrowed to buy the Town Center properties and buy out leases of sitting tenants. The city secured the line of credit in 2003 and converted it to short-term financing four years later.
With the Town Center refinancing, the city has the ability to pay off the debt early in 10 years.
The city received another bit of good news Wednesday. The cost of the refinancing was less than expected, meaning officials can put another $120,000 in reserves.
The refinancing will become final next week.
Before the bond sales, Standard and Poor’s reaffirmed its A+ credit rating for University Place, Faison said. S&P gave the city that credit rating in August 2011, but three months later another rating agency, Moody’s, downgraded its rating for the city.
As of December, University Place still owed more than $47.6 million in bond debt to develop Town Center and Cirque Park, purchase and remodel its existing city offices and make street and other capital improvements, according to state auditors. The city also owes nearly $2.4 million in loans it took out from the state to improve Cirque, Grandview and Sunset drives and Bridgeport Way.
The city has a plan to pay down the debt, setting aside between $3 million and $4 million a year to make the needed payments.
The debt payments will leave the city little wiggle room to offer new programs and services as evidenced by the proposed 2013-14 budget.
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