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9611 SE 36th Street
Mercer Island, WA 98040
Phone: 206.275.7783
Fax: 206.275.7787
Email: mifinance@mercergo. . .
Hours: 8:30 am - 5:00 pm (Mon - Fri)
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City Debt

The City has prudently issued little debt over the years, maintaining a sizable debt capacity and consistently following a conservative fiscal management policy as reflected in the excellent bond ratings from Moody's rating service—Aa1 rating on its unlimited tax general obligation (UTGO), or voted, bonds and a Aa1 rating on its limited tax general obligation (LTGO), or non-voted, bonds.  According to Moody’s, Mercer Island has the highest LTGO bond rating in the state (shared with Seattle, Bellevue, and Redmond) and the second highest UTGO bond rating in the state (behind Seattle and Bellevue, which have a Aaa rating).  A high bond rating equates to lower interest costs and is very desirable.
 
The City can issue five types of debt which have legal limits set by the State.  The five types of debt include:

Voted general obligation bonds
Non-voted general obligation bonds
Revenue bonds
Loans 

For the purposes of the legal limit debt calculations, leases and loans are included with the non-voted general obligation debt limits.  A schedule of all the City debt classified by type is included later in this section.

Schedule of Debt Outstanding
Schedule of Debt Capacity

Voted Debt

Voted debt is that which the citizens agree to in an election and is supported by special (excess) tax revenues levied on property each year.  Voted debt has generally been used for the purpose of funding large public buildings or buying open space property.  The City currently has no voted debt outstanding. 

Non-Voted Debt

Non-voted debt must be paid for out of the general revenues of the city.  Non-voted debt includes not only bonds but also any loans and lease obligations of the City.  The active bond issues are described below.

  • 2003 CCMV Property – This bond issue, paid for from real estate excise taxes, was used to buy the site from the Mercer Island School District for the construction of a new community center.
     
  • 2004 CCMV Construction - In 2004, the City issued $2.0 million in councilmanic bonds to partially pay for the construction of a new community center.  The new center was completed in December 2005.  
     
  • 2007 Fire Apparatus Lease (Velocity Pumpers) – In 2007, the Mercer Island City Council authorized a contract with Pierce Manufacturing to purchase two Velocity Pumper Trucks through a lease purchase financing agreement with Municipal Asset Management Inc. in the amount of $1,035,026.  
     
  • 2007 Fire Apparatus Lease (Mini Pumper) – In 2007, the Mercer Island City Council authorized a contract with Pierce Manufacturing to purchase one Mini Pumper Fire Truck through a lease Purchase financing agreement with Municipal Asset Management Inc. in the amount of $251,982.  
     
  • 2009 LTGO Emergency Water Supply – In June 2009, the City issued a two year $1,015,000 LTGO bond as interim financing for the construction of a well for emergency water supply use.  To pay off the debt, the Council’s declared intent is to sell a First Hill property owned by the Water Utility, which was declared surplus in April 2009.   In June 2010, given the condition of the Puget Sound real estate market, the City amended the terms of the two year LTGO bond, extending the maturity date out another two years to June 1, 2013.  In addition, the City exercised its option to prepay $40,000 of the principal early, thereby reducing the par amount of the bond to $975,000.  Debt service is being paid by the Water Fund. 
     
  • 2009 LTGO South Mercer Play Fields – In 2009, LTGO bonds were issued to fund capital improvements at the South Mercer Playfields.  The original issue amount was $1,000,000. 
     
  • 2009 LTGO Sewer Lake Line – In 2009, LTGO bonds were issued to fund a portion of the sewer lake line replacement project.  Sewer utility rates are being used to repay the long-term debt.  The original issue amount was $9,405,000.
  • 2011 LTGO First Hill Water Improvements - In 2011, LTGO bonds were issued to fund capital improvements to the water system in the First Hill neighborhood.  Water utility rates are being use to repay the long term debt.  The original issue amount was $1,500,000.

Public Work Trust Fund Loans

In addition to the above debt, the City has the two long-term loans outstanding as of the end of 2010.  Public Works Trust Fund loans are low-interest loans (1% interest) administered through the State of Washington Department of Community Development.  In 1985, the legislature made provisions for this program from the Public Works Assistance Account, which is funded by the Motor Vehicle Excise Tax (MVET) collected by the state.  Qualifying criteria require jurisdictions to do the following:

  1. Impose the ¼ of one percent real estate excise tax;
  2. Have developed a long-term plan for financing public work needs;
  3. Be using all local revenue sources which are reasonably available for funding public works; and,
  4. Have an adopted comprehensive plan.

 Schedule of Debt Outstanding

Description Issue Date Amount Originally Issued Amount Outstanding 12/31/2011
Non-Voted Debt      
   2003 Mercerview Property 05/2003 $2,290,000 $970,000
   2004 CCMV Construction 10/2004 $2,040,000 $1,430,000
   2009 Emergency Water Well 07/2009 $1,015,000 $975,000
   2009 S. Mercer Playfields 08/2009 $1,000,000 $870,000
   2009 Sewer Lake Line 08/2009 $9,405,000 $8,760,000
   2011 First Hill Water Improve 03/2011 $1,500,000 $1,465,000
Total Non-Voted Debt   $17,250,000 $14,470,000
       
Lease Obligations      
   2007 Fire Velocity Pumper 07/2007 $1,035,026 $663,536
   2007 Fire Mini Pumper 09/2007 $251,982 $135,833
Total Lease Obligations   $1,287,008 $799,369
       
Total General Obligation Debt   $18,537,008 $15,269,369
       
Public Works Trust Fund Loan      
  Sewer Pump Rehab II 11/1992 $368,625 $17,726
  Sewer Lake Line 01/2005 $7,000,000 $6,041,360
Total Public Works Trust Loans   $7,368,625 $6,059,086


 
























Debt Capacity

The debt capacity of the City is limited by law.  Below is a chart for showing the computation of the debt capacity as of December 31, 2011.
 

  Limited Tax Unlimited Tax
General Purpose Debt (I) (based on 1.5% if AV) General Purpose Debt (I) (based on 2.5% if AV)  Open Space and Parks (based on 2.5% of AV) Utility Purposes (based on 2.5% of AV)
Legal Limit  64056555554 $121,728,461 $202,880,768 $202,880,768 $202,880,768
Add: Cash on hand for debt redemption 4,475 4,475 0 0
Less: Limited Tax Debt outstanding 15,269,369 15,269,369 0 0
Less: Unlimited Tax Debt outstanding 0 0 0 0
Remaining Debt Capacity, Limited Tax $106,463,567 $187,615,874    
Remaining Debt Capacity, Unlimited Taxes     $202,880,768 $202,880,768

Note: 12/31/2011 AV: $8,115,230,704 (I) Indebtedness for all General Purpose debt may not exceed 2.5% of AV.  Any non-voted debt reduces the margin available for noted general purpose debt.
 

Additional Information

For more information on the City's debt policies and the 2011-2012 budgeted principal and interest payments see the 2011-2012 Budget Policy.


 



 

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