The Gristle

Pay it forward

Tuesday, September 27, 2011

PAY IT FORWARD: Bellingham City Council’s finance committee met last week to discuss a constellation of possible options to pay back a $3.3 million loan from the Greenways endowment fund to complete the purchase of Chuckanut Ridge. The full council approved the loan Monday evening.

The city agreed in August to purchase the 82 acres of forested wetlands for $8.23 million from Washington Federal, the Seattle-based lender that acquired the property when Horizon Bank folded in 2010. Roughly half of the total amount, or $4.5 million, will be paid from the Greenways III levy allotment for Southside property acquisitions. An additional $500,000 arrives from parks impact fees from Bellingham’s six southernmost neighborhoods, exhausting them for other parks uses. The remaining $3.3 million must be repaid, with interest, to recover the endowment’s interfund loan—ideally, in the minds of council and most observers, from sources other than the obvious backstop, the surplus and sale of a portion of the property at the end of the six-year term of the loan.

So anxious was City Council to make that ultimate repayment plan plain, they added a clause to their final ordinance authorizing the loan that noted—much as a home serves as ultimate collateral for a home loan, and repossession serves as the loan’s ultimate repayment plan—“until paid in full, the 82 acres of real property shall serve as collateral for any unpaid balance.”

“We’ve established what our ultimate repayment method is,” Seth Fleetwood noted. “And it is one I, and I think others on the council, hope doesn’t have to happen.”

The clause ought to serve as a clear and enduring reminder of the uncertain future of this property. Of more immediate importance, the clarification backs away from what council originally considered in August, that the endowment could be made whole by additional raids on Greenways. Indeed, the very term of the agreement, through 2016, anticipates the timing of a fourth Greenways levy.

“What was originally put before us by the administration was that the payback method was going to be Greenways IV, and that is what we voted on [in August],” Council member Jack Weiss cautioned. “The reason a six-year term was chosen was because of Greenways IV.”

“I haven’t heard a single council member express support for encumbering future Greenways with the duty to pay off a past debt.” Fleetwood countered. “It would be unprecedented.”

City staff sketched other options that might repay the loan, including negotiation on more favorable terms with Washington Federal, perhaps in installments or rescheduled payments, or by securing grants from (undetermined) state and federal sources. Admittedly among options could be a rezone of some portion of the property, where a sale of that part could finance the whole. The rezone might also serve to make the property eligible for density exchanges through the city’s transfer of development rights program, committee members learned, although critics noted the TDR program is already overextended as a proposed solution to ease development problems around Lake Whatcom.

Optimistically, council members expressed hopes the endowment (intended to maintain properties) might be made whole through contributions from capital fundraising campaigns. Fundraising could be from private or public sources (or a combination), the latter perhaps in the form of a general or special levy. Yet some council members expressed concern that applying additional public funds to the purchase of Chuckanut Ridge could stretch the patience of voters to the breaking point and destroy future Greenways efforts.

Five million dollars, including $4.5 million in acquisition funds and $500,000 in impact fees, is more than the City of Bellingham ever clearly stated it would be willing to pay for this property, Fleetwood noted. “The only evidence for what the population of citizens believed should be paid for this can be found in inferences from past votes. There’s the 1997 Greenways, where we indicated this is an area where there was acquisition potential,” he stressed. “We sought $3.5 million for the Southside in that levy, with a third of it dedicated to acquisitions around Chuckanut Ridge, so an expectation at that time of $1.6 million. The Greenways III levy established another $4.1 million, and we decided to go above even that in this purchase.”

“The fact that $1.6 million in the 1997 Beyond Greenways levy was not used specifically to buy Chuckanut Ridge, but was used to buy important properties around it, in anticipation of preserving it, is one contribution voters made to that area,” Weiss agreed. “The $4.5 million in the current levy is another contribution to preserving that area. Then to expect that additional future Greenways might also go toward the purchase, that will be radioactive” to the success of future levy efforts, Weiss predicted.

Asking voters to put up another $4 million in a future levy to again purchase the same property would likely kill unified Greenways efforts and ignite a civil war, he warned.

The administration characterized the purchase as “concluding nearly 20 years of debate about the fate of Chuckanut Ridge.”

A noble thought but, of course, the debate has not even begun on the steep price the city may ultimately pay for the property as future acquisitions or public works are trapped or eliminated because the city stretched so far in this purchase. Indeed, the Greenways levy itself may not stretch nearly far as originally imagined, with its three primary funding premises crimped by recession.

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