Murray City authorizes $37 million bond for new city hall
Nov 25, 2019 11:48AM
By Shaun Delliskave
The southwest view of the new city hall shows a plaza for outdoor events and the curved outer wall of the city council chambers. (Shaun Delliskave/City Journals)
By Shaun Delliskave | [email protected]
Instead of holding a vote to allow Murray residents to approve a General Obligation Bond to fund the new city hall, the city has decided to pursue a Lease Revenue Bond, which requires no vote for the $37 million to fund construction. The City Council authorized the mayor’s request at the Nov. 12 council meeting.
At the Oct. 15 Municipal Building Authority Meeting, Finance Director Brenda Moore said, “Having worked here for eight and a half years, I now know why we need a new city hall. Besides leaky plumbing, bad windows, and having to send citizens to other buildings for permits or business licenses, when we have an earthquake, it is almost a guarantee that the building will collapse.”
“We not only have first responders in this building, but very valuable employees, both to us and their families,” City Councilor Dale Cox said. “If the Wasatch Fault so much as burps, this building is going to come down, and we need to do something about that.”
For funding large capital projects, a city generally offers a bond to fund construction of them. By buying a bond, the bondholder primarily lends money to the town, while they also receive interest with the return of the investment over time. Of the two most common municipal bonds, general obligation and revenue, Murray City chose revenue bonds as these are not backed by the government’s taxing power but by revenues from a specific project or source, such as highway tolls or lease fees.
Specifically, Murray chose a lease revenue bond, which means Murray is backing the bond with revenue from the city’s general fund. This type of bond also says the city will pay back the relationship with higher interest rates.
Murray’s general fund is not only funded by sales taxes but by transfers from its enterprise funds, such as Murray Power’s collections. Murray City Power, Water and Wastewater and Solid Waste funds transferred nearly $4,056,368 in June of this year into the general fund, roughly 8% of enterprise revenues.
Should Murray be impacted negatively to the point of not being able to pay back the bond, then the bondholder could place a lien on the city hall project. If the city had chosen a lower-interest-bearing general obligation bond, they would have had to put that to a citywide vote, as the full faith and credit (taxes) would be paying the interest on it.
For the new city hall, Murray City will enter into a ground lease agreement. The city leases the ground to a Local Building Authority (LBA), typically the project owner or bond issuer. The town will hold title to the property, but the LBA is given use of the property for the term of the lease.
Likewise, Murray enters into a municipal lease agreement with the intent of the lessee (Murray) to purchase and take title to the property. The financing is a full payout contract with no significant residual or balloon payments at the end of the lease term.
The Murray City Hall bond is set for 31 years at 5.50% at a maximum interest rate; however, the actual rate will likely be lower.
Brent Barnett commented in the public hearing portion of the Oct. 15 city council meeting, accusing the city of not being transparent in the process. “Yet there is no way in the world that this is a transparent action. No matter what the source of the money. No matter how the bond is made. If we believe in transparency, this simply doesn’t make anyone proud.”
Murray City posted notice of the first bond discussion 15 days before the city council’s Committee of the Whole meeting and provided a public comment period between the Oct. 15 and Nov. 12 city council meeting when the resolution was adopted.