City uses contingency account, line of credit for building purchase
To purchase the South Office/Coldwell Banker/Metro building at The Round at Beaverton Central, the city of Beaverton will use money from its $15.3 million general fund contingency account, coupled with a line of credit to offset the drawdown.
The City Council unanimously approved the $8.65 million purchase - plus around $200,000 in closing costs - at its Tuesday night meeting.
The city has arranged a one-year line of credit with KeyBank beginning July 1 for up to $6 million at an estimated 1 percent interest rate.
In the first part of fiscal year 2012-13, the city plans to draw down $2.85 million to offset the contingency funds used for the purchase.
The city would have discretion over the remaining $3.15 million for capital improvements to the 108,000-square-foot building - whose replacement cost is estimated at $17.5 million - once its ultimate use is determined. When that decision is made later in the fiscal year, the city would convert the amount drawn through the credit line to a seven-year term loan. The interest rate would be based on prevailing market conditions.
During a discussion Tuesday night between councilors and city officials over the arrangement, Finance Director Patrick O'Claire clarified the $440,000 annual loan repayment - based on a 2.53 percent interest rate - would be slightly higher than the current lease obligation for the Central Plant. He also pointed out the payments were temporary and lead to full ownership of the building.
'The idea is to conserve our contingency,' O'Claire said. 'It gives us the ability to pay ourselves back.'
Also, once the city and new developer BTR Associates close on their respective transactions, BTR is obligated to provide the South Office Building with the right to 220 parking spaces in The Round's Lot 8 parking garage. The spaces would be available Monday through Friday without charge for 25 years. Of the spaces, 25 will be first-floor slots reserved around the clock for city use.