The city is planning to restructure its two general obligation bonds, a move that will save Tigard about $1.4 million and prepare the way for a new bond that could help finance the construction of a facility that would house most of the city’s departments under one roof.
Tigard’s current voter-approved bonds include a library bond, which is set to be paid off in about three years, and a parks bond that will be paid off in 2031. These bonds combined, including interest, total $19,130,725, according to a city staff report.
At a Mar. 3 City Council meeting, during which councilors unanimously approved the restructuring, Finance Director Toby LaFrance compared the plan – which would shorten the payoff period for the parks bond by five years – to paying off a 20-year mortgage in 15 years.
“In doing so, you’re going to shorten the overall time period at which you’re repaying your mortgage debt. The benefit is that you pay less interest, as there’s less interest accruing since it’s over a shorter period of time,” he said. “However, in order to make those payments … you end up paying a little bit more on your monthly mortgage payments.”
For the typical Tigard homeowner, restructuring would mean paying a total of $182 more in property tax through 2026, LaFrance said. But, by paying off the bond early, the city will save $1.4 million in interest payments, which translates to a savings of $82 per typical household through 2031 as there will be no payments for the last five years of the bond.
“If you’re a property owner and you’re thinking of moving away from the city of Tigard sometime between now and 2026, by us restructuring bonds, you’re going to pay a little bit more on your property taxes than you would have otherwise,” LaFrance said, discussing the pros and cons of the plan. “However, if that property owner stays in the city of Tigard through 2031, they are going to pay less.”
In February, the council threw its support behind a project that would build a new “all-in-one” facility to house the police department and most other city departments at the current Public Works Department site on Burnham Sreet. A new Public Works facility would be built at a yet-to-be-determined location outside of downtown. The rationale for the project, per city staff, is that current city buildings are cramped, outdated and not seismically sound.
Potential funding sources for that project – which will cost about $135 million, according to preliminary estimates – include selling some 13 city-owned acres in downtown for development, utilities and special revenue funds, photo enforcement program revenue and a new voter-approved bond that would not increase the current tax rate of 33.85 cents per $1,000 of assessed value.
Restructuring Tigard’s current bonds will facilitate putting together a new bond, LaFrance said.
“A central principle of funding the project is the ability to ask the voters of Tigard to approve a GO Bond to fund the project that should not increase their tax rate,” according to staff report for the March meeting. “It is estimated that Tigard will ask voters to approve the new bond sometime in 2022. During the interim, if Tigard does not take action, the tax rate needed to pay for Tigard’s current GO Bonds will continue to decline.”
The staff report also notes that the interest payment savings that come with restructuring, and which would be passed onto taxpayers, would be reaped whether or not voters approved a new bond to pay for the all-in-one facility.
“It’s always good to save the voters $1.4 million,” Council President John Goodhouse said during the Mar. 3 meeting.