City contributes $550,000 toward Gateway stormwater pond project

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Blaine city councilmembers voted unanimously to contribute $550,000 to defray the cost of a large stormwater pond being constructed on the Gateway parcel. The city took action after a number of businesses that own pieces of the Gateway parcel, also known as the old municipal airport site, expressed concern about the project’s total cost and the amount that each business will have to contribute toward it.

At their February 10 regular meeting, Blaine city councilmembers voted 7-0 on Resolution 1790-20 and a second action item providing financial direction to city staff. The resolution essentially contributed the value of the stormwater pond land ($338,000) to the project, while the second action item directed an additional cash contribution of up to $212,000 of city funds, for a total contribution of $550,000 toward the roughly $3.5 million project.

“It’s been a priority for the city council to stimulate development on these properties for many years,” city manager Michael Jones said in recommending the expenditure. “It’s been articulated by council that there are three primary reasons for that economic development. One is to increase the tax base, to take these properties from their public holding, which pays no property tax and doesn’t generate much in the way of other tax revenue.… The second would be to increase the number of jobs in the community – to take this vacant land into another more productive use that provides jobs for community members and folks from the surrounding area. And the third item would be to increase the range of services available to residents and visitors.”

The $550,000 contribution formalizes and increases an earlier $350,000 commitment from the city. In addition to city funds, the project is being paid for with a grant from the Whatcom County Economic Development Investment (EDI) Board of about $883,000 and a loan of about $1.8 million. In November, city council voted to form a Local Improvement District (LID) to assess part of the cost of the project against the Gateway property owners, which include Yorkston Oil Company, Mercer, Chuckanut Bay Foods and IK Truck Repair.

Jones said that the city decided to take action now in order to create more certainty for the property owners, some of which have projects in progress, as well as for potential buyers like Family Care Network and the White-Leasure Development Company, which have reached tentative land deals with the city for about 2.5 and five acres, respectively, of the Gateway parcel. The LID assessment against property owners will not take place until later this year, after the project is completed and its total cost is known.

Technically, Resolution 1790-20 transferred the real property from the city’s general fund to its stormwater fund at no cost. “The land has an estimated value of $338,000 and the land belongs to the general fund,” Jones explained. “The stormwater fund, as a separate enterprise, needs to acquire the land for the purposes of the pond being constructed and existing. At the meeting, city council opted to transfer it at no value, or at no cost, so that it would not be a factor in the total cost of construction.”

“That action would then have the effect of reducing the total estimated project cost by the value of the land, which is $338,000,” city finance director Jeff Lazenby further explained at the meeting. He said that city attorney Jon Sitkin provided a legal opinion stating that such a transfer is legal, and that the city had also consulted with the Municipal Research and Services Center, a nonprofit that serves local governments across Washington state.

In addition to not charging the property owners for the pond land, the city will not charge them for early engineering costs associated with the project. “There was one decision that was made in concert with some consultations with a number of you, and that was to remove the early engineering costs,” Jones told councilmembers. “Really that analysis was for a different project, a bigger project, a project that served other properties. So there’s really not a benefit to these property owners for that early work, so that’s not included in our project costs, so we took that off the table.”

After contributing the value of the land to the project, the second step was for city council to decide on an additional cash contribution. Three options were presented to councilmembers, but city staff recommended “option B” entailing a $212,000 cash contribution from the city. Jones said that “option B” hits the “sweet spot” by providing a stimulus for economic development while not overburdening city finances. “It will increase the city’s tax base, and it’ll add jobs to the community and provide a wider range of services to Blaine residents and visitors when these properties are developed,” Jones said.

Lazenby said that the $212,000 cash contribution will consist of a $100,000 contribution from the city’s Rural Economic Development (RED) Fund and a $112,000 contribution from the stormwater fund. He said: “Why the RED funds? Essentially using RED funds for this purpose meets the criteria of the fund, in that the project promotes economic development, and in that it directly achieves job creation, business retention and adds non-electrical infrastructure.”

While city councilmembers considered a higher, $412,000 cash contribution, Lazenby said that this would place an undue burden on city services. “An additional commitment would have to come from either the general fund or the stormwater fund or both,” he told councilmembers. “That would essentially place an undue burden on either of those funds, affecting city services and programs as well as stormwater rates.”

Councilmember Garth Baldwin said he hopes the Gateway property owners and tentative buyers will move forward with developing their properties following the $550,000 city contribution. “If this all goes through and everything, I hope that this is the motivation that the participants of the LID are looking for to get them to fulfilling their permits and their promises to develop,” Baldwin said prior to the vote. “I just want to say that because that is my biggest fear.”

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