City backed into financial corner | Inside Politics

With some council members using the term “no choice,” the City Council approved Mayor Jim Ferrell’s recommendation to refinance the purchase of the Target property for $6.4 million. The city had purchased the property for $8.2 million and had sold a small piece for $2.18 million, leaving $6.4 million remaining to be refinanced. The city had hopes of selling the property at a profit within three years, which expires next month. That was part of a plan to pay off the loan and use the profit to help pay for the Performing Arts and Event Center. The city financed it but has been paying only the interest on the loan, not on the principal. The city has been unable to sell the property, however, and the refinance will extend the existing loan another five years.

City officials say after they receive a grant to pay for a new grand staircase and the planned hotel is built, the property will be more valuable. But that strategy hasn’t worked so far, and the optics of spending $1 million on a grand staircase, even if it is through a grant, will likely not sit well with residents who already have questions about the city’s priorities.

The mayor and council tried to put a good face on an uncomfortable situation. The PAEC is about $8 million short of funding, and no one has stepped forward to buy the rest of the land. Many residents, led by former local financial consultant Matthew Jarvis, thought the city overpaid for the property in the first place. Some insiders are critical of the city for not marketing the property better.

In public meetings and political debates, Ferrell has pointed at selling the property, fund raising, selling the naming rights and grants as ways to help make up the difference. It is unlikely any combination of those will make up the difference in the near future.

For some, this is the scenario they saw coming.

Over the last five years, the city has been spending money to acquire land for the PAEC, hotel and downtown park.

Many residents felt City Hall was spending beyond its means and would one day find itself in the position of not having money available for other services such as police officers. One of those people leading the charge four years ago by questioning city priorities was council member and candidate for mayor Jim Ferrell. Ferrell won the mayor’s post by defeating incumbent Skip Priest, in part by pitting his priority for police against Priest’s pursuit of the PAEC.

Once in office, the PAEC seemed to become Ferrell’s highest priority along with improvements in the city’s central core.

Now it’s Ferrell defending the city expenditures and council member and candidate for mayor Susan Honda questioning Ferrell’s spending. Honda, as did Ferrell when he was on the council, has frequently found herself in the minority with her concerns.

Rumors of the city having serious financial challenges have been circulating for over a year as the city considered several tax increase options, including a tax on Lakehaven Water & Sewer District. The stated reason was the need for police officers. At the recent Mirror candidate forum, Honda accused Ferrell of transferring money from city departments, such as the building department, to fund other needs. If the building department is underfunded and short of staff, it will cause a delay in approving permits and undermine economic development efforts. Also, the city has not increased its police compliment above the 131 positions this year despite its seeming urgency a year ago. Ferrell says the city hopes to get a COPS grant for up to five police officers in 2018. That could be problem, however, as the grants are not full funding, and the city will have to pay full price for the officers after the grants expire. And residents will be subsidizing the PAEC for hundreds of thousands of dollars per year for several years.

Some residents described the funding concept behind the PAEC as a house of cards, others as credit card management. But two mayors and several City Council members brushed aside community concerns in a myopic drive to build the PAEC as a symbol of progress. The financial plan is now in tatters with refinancing bandages necessary as city leaders have backed themselves into a corner of their own making.

Ferrell and council members still feel they can sell the land and, at some point, likely may, although some rumors suggest the city will only pay on the interest again as it considers other options for the land. All acknowledge it is a less-than-desirable situation and not the one they planned. The term “we had no choice” was used several times by the elected officials. And that knowledge makes it worse as now the market knows their negotiating position is much weaker. Had this information come out three months ago, and Honda been able to take advantage, the mayoral race might be close now. And there may be more to this story still.

Federal Way resident Bob Roegner is a former Auburn mayor and retired public official. He can be reached at

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