Williams on the Street LID, Part II

From the Sept. 22 North Coast News: Donald Williams has been closely following every step of the complex Street LID project of Ocean Shores. The North Coast News asked Williams to write a chronology on the project, to help people understand how it all happened. After last weeks’ chronology of some key pre-LID public meetings, he looks at the formation of the LID, in Part II:

By Donald S. Williams

In last week’s installment of the Ocean Shores street LID project chronology, I covered the events starting with the first town hall meeting in Nov., 2005 through the release by the City on Feb. 6, 2007 of preliminary “special benefits” and preliminary assessments for each parcel.  The special benefits and assessments were prepared by Macaulay & Associates under a contract with the City that was signed on July 24, 2006.  Last week I reported that Macaulay & Associates was paid $141,600.  Since then, I’ve learned that the first contract with Macaulay & Associates was only for a “feasibility study.” The City Council on Oct. 23, 2006 approved an amendment to Macaulay’s contract authorizing completion of the preliminary assessments, which increased Macaulay’s first contract to $348,400.  As reported last week, the second and final Macaulay special benefits and assessments report, released by the City on Aug. 1, 2010, had a contract cost of $329,230.
The total for both Macaulay contracts is $677,630 of which, according to City Hall, $672,293 has been spent up to this point.
This week’s installment starts with the release on Feb. 6, 2007 of the first Macaulay report with preliminary assessments and takes us through the second year of LID construction work.

Feb. 12, 2007.  The preliminary special benefits and assessments report showed the LID project to be feasible because, as explained last week, the project’s cost-to-benefit ratio was 0.683 – meaning that for every dollar of benefit received only 68.3 cents would be spent. State statutes require that the benefits received from a LID must exceed the LID’s cost, otherwise a LID project cannot be started.
Armed with this information, the City Council adopted Resolution No. 560 declaring its intention to order the formation of a LID to finance the cost of repairing City streets and it set March 5 for a public hearing on the formation of the proposed LID. The motion passed unanimously (Council members: Creighton, Johnson, Patrick, Vela and Veitz).  Resolution 560 declared the total estimated cost and expense of the improvements to be $31,784,115.22 but it contained the following caveat:  “Notwithstanding such estimate, the entire actual cost and expense of the improvements, including costs of financing, shall be borne by and assessed against the property specially benefited by the improvements.  Actual assessments may vary from estimated assessments as long as they do not exceed a figure equal to the increased true and fair value the improvements add to the property.”
What this meant, and it was known by most people and by the City Council, was that the stated $31.784 Million cost for the LID project was only an estimate and that it might be higher.  (And it actually became much more costly than originally described.)  The wording of Resolution No. 560 made it clear that the project costs could escalate but as long as the cost-to-benefit ratio remained less than one, the project was a go.

Mid-Feb., 2007.  The City mailed to each property owner a notice stating the adoption of Resolution No. 560.  The notice stated that the estimated cost of the improvements is $31,784,115.22 and that 100% of such costs will be levied against the property within the proposed LID specially benefited by the proposed improvements. The notice announced the March 5 public hearing and provided each property owner with an “Estimated Amount of Assessment” as it was shown in the Macaulay report dated February 6, 2007.
March 5, 2007.  The Council heard public testimony, comments and protests on the formation of the LID. 71 property owners signed in to testify and 40 testified.  29 letters were received. Council minutes report that 11 letters were general protests, eight protested because of low or fixed income, three requested reductions because their lots were camping lots, six requested a reappraisal and one was an information request.
March 12, 2007.    The Council passed Ordinance No. 820 adopting plans and specifications for the improvements, ordering the street improvements and creating LID 2007-01. The ordinance stated, “The total cost and expense of the improvements and all work necessary in connection therewith and incidental thereto is estimated to be $31,784,115.22, of which 100% shall be borne by and assessed against the property within the LID specially benefited by the improvements.”  Ordinance No. 820 passed with three yes votes (Johnson, Patrick and Vela) and one no vote (Creighton).  Veitz was excused.
Passage of Ordinance No. 820 started a statutory 30-day protest period. If written protests amounting to 60% or more of the dollar amount of the preliminary assessments were filed during the 30-day period, then the City would have been prevented from proceeding with the LID.  (RCW 35.43.180)  Protests at the level needed to stop formation of the LID did not materialize and, by state law, the LID must then move forward.

LID Financing
The LID was formed and the project officially started on March 12, 2007 when the Council passed Ordinance No. 820.  As initially planned, the project was to be financed by selling two bond anticipation notes (BANs) that were due on Aug. 1, 2011.  The first BAN was sold to private investors on July 26, 2007 in the amount of $7.615 Million with a yield of 5.0%, and it provided the funds to start issuing road contracts for construction Phase I.  The second BAN was issued Feb. 1, 2008 (before Phase II construction began) for $24.455 Million with a yield of 4.75%.  The total proceeds from both the BANs added to $32.070 Million – just enough to pay the expected $31.784 Million cost of the LID.
The City planned to refinance the two BANs (i.e., “defease” them) before their due date by selling a long-term (20 year) LID bond that would cover the total cost of the LID including the principal and all interest costs of the BANs plus legal, administration and financing costs – at least that was the City’s plan.

Next week: The Project Starts

The project construction started in the summer of 2007 with Phase 1.  Phase 1 consisted of three paving contracts totaling about $11.8 Million. Streets were resurfaced south of Taurus Boulevard and west of Point Brown Avenue, plus Catala Avenue. Phase 2, in the summer of 2008, consisted of two contracts totaling about $8.9 Million for south of Albatross and east of Point Brown Avenue.  Phases 1 and 2 proceeded smoothly with Public Works Director Ken Lanfear reporting on a regular basis at City Council meetings that the LID project was on track and on budget.

(Author’s Note:  There was no official project manager.  But because Lanfear appeared to be doing the tasks of a project manager, the North Coast News dubbed him “the de facto project manager.” There never was an appointed project manager.)

Next week’s installment will begin just before the first Phase 3 construction contract was to go out to bid.  Former Mayor Bunkers in March of 2009 discovered that the City had insufficient funds to complete the project.