Bid’s a dealmaker
Seven bids to building infrastructure come in way under budget
By Sandra L. Lee of the Tribune
Wednesday, April 8, 2009
A bid that came in about a third less than the engineer’s estimate may make it possible to finance internally the development of the Port of Lewiston’s Business and Technology Park.
All seven bids to build a street, bicycle and pedestrian path and underground utility lines in the 24-acre park east of Juniper Drive were less than the estimate of $951,000, Port Manager David Doeringsfeld said.
The lowest was $594,445 from M.L. Albright and Sons of Lewiston. Adding in some alternates such as a stormwater line that will reduce the obligation of future tenants, a walking path, a 10 percent contingency fund and some preparation costs such as engineering and legal counsel associated with the original plan to sell bonds, the total jumps to about $806,000.
The original estimate was $1.15 million, Doeringsfeld said.
The port is kicking in $200,000 of the cost and the Lewiston Urban Renewal Agency another $100,000. The intent was to sell bonds for the remainder that would be repaid with tax-increment revenues. The agency gets any increases in property taxes, whether generated by market increases or new construction, since Jan. 1, 2005, from three so-called revenue allocation areas in the city. The business and technology park is in one of those areas.
An alternative to selling bonds, which could be difficult given the small size of the project and the present economy, is to borrow money from the other two revenue areas. It’s against the law to spend money outside the area in which it is generated, but it is legal to treat it as a loan, City Attorney Don L. Roberts said.
Documents would have to be prepared setting up a repayment schedule with interest and a provision that if the money was needed in the revenue area in which it was generated, the agency would have to repay it early. That could be done by refinancing, likely in a better market than exists now, Roberts said.
The advantages, other than not having to pay the cost of issuing bonds, is the agency can set the interest rate and other conditions of the repayment. An acceptable rate would be 4.5 percent or 5 percent, a couple points less than the open market.
Roberts said City Manager John C. (Jay) Krauss came up with the idea last month when it was apparent the project was in danger because of the economy.
The loan could be repaid in five or six years, but people buying bonds want a longer term to collect on the interest. They also are shy of unrated bonds that rely on tax increments for repayment, Eric Heringer of Seattle Northwest Securities said via a conference call, because they provide little in the way of security in some economic situations.
Another disadvantage in trying to sell the bonds is two-thirds of the property where the increment is collected is in the hands of a single owner, Bedrock LLC, he said.
There are some opportunities through federal stimulus programs, Heringer said, but the best alternative in this market would be for the city or the agency to self-finance.
Bonds were sold earlier for a water project in North Lewiston, and the loan wouldn’t hinder making those payments, said Daniel Marsh, who sits on the agency board and also is the city’s administrative services director. It also wouldn’t prevent taking on additional work there, he said. “We could still make some pretty good things happen out in North Lewiston if we wanted to.”
The third area is in downtown Lewiston.
The board didn’t vote to award the bid or to go ahead with the internal loan, choosing to wait until next week, when Roberts said the details can be put together. That meeting will be at noon Wednesday at city hall.
Lee may be contacted at [email protected] or (208) 848-2266.