The Maple Valley City Council is looking at options for refinancing $2.9 million in general obligation bonds. The council agreed at Monday night’s meeting that refinancing will happen, but whether it will be a tax-exempt or taxable structure remains a contentious issue among the council members.

The 20-year general obligation bonds were first acquired in June 2000 for about $6.7 million. They were used to purchase the Henry’s Switch property from the county and fund half of the “legacy” site, located across the street from the Tahoma School District Central Services Center on state Route 169.

In 2005, the City Council refinanced the remainder of the bonds because interest rates were low, savings about $284,000. The city still had about $4.8 million of the bond’s principle to pay off. Now, 10 years later, the principle is down to about $2.9 million.

Refinancing the bond using a tax-exempt structure with today’s interest rates, which are at a “historic low” according to Justin Monwai of Piper Jaffray & Co., would save the city about $223,267 over the next five years. Refinancing the bond using a taxable structure would save about $175,555 — a difference of approximately $47,700.

For council members Noel Gerken, Layne Barnes and Linda Johnson, the decision is a no-brainer: choose the option that saves the most money.

However, Councilwoman Erin Weaver, Deputy Mayor Sean Kelly and Mayor Bill Allison disagreed, saying the decision is not just about the savings. Even though refinancing the bond would save more money using the tax-exempt option, Weaver said the land restrictions enforced by that option outweigh the benefits.

Councilman Dana Parnello said he was leaning toward the tax-exempt option, but wanted to learn more about what the intended purpose was for the land at the time of the purchase.

At the time the land was purchased, the bonds used were classified as tax-exempt, which imposed a restriction on the use of the land.

The restriction is that a maximum of 5 percent of the land purchased with the bonds can be used for private purposes. Because the bonds were used to purchase only half of the legacy site — the other half coming from the city’s money directly — this restriction means that only 1.25 of the 50 acres can be used by or leased to a private business.

The same case applies to Henry’s Switch, but that property has additional deed restrictions in place, limiting the entire property to public use indefinitely.

Gerken said these kinds of restrictions and use limitations can be good for the city’s property.

“Frankly, I’m OK with (the restrictions),” he said at the meeting. “Options can be good, but options can also be bad.”

In five years, when the bonds are paid off, the restrictions — if any still exist — will be lifted.

Johnson suggested the council vote to take the additional savings (the tax-exempt option) and use the next five years to figure out what to do with the property.

“Five years is nothing,” Johnson said during the meeting.

Allison responded to Johnson’s comments by saying if the council chooses to have the restrictions on the land, they could miss an opportunity in the next five years to do something with it.

“I think anytime we restrict ourselves to the options that are out there, that can be a detriment to us,” Allison said.

He added, “Right now, I hope it doesn’t take up to five years for something to happen on this property.”

The “opportunities” Allison referred to could include partnering with a private company to build a recreational facility, City Hall or other structure and potentially leasing out portions of the property.

City Attorney Jeff Taraday chimed in by saying, “You will have more leasing flexibility when you have taxable bonds than when you tax-exempt bonds.”

Also, opting for a taxable bond option does not lock the city into an agreement to use the land in partnership with a private entity, said Shawn Hunstock, the city’s finance director. The city could still choose to use the land entirely for public use.

The City Council decided at Monday’s meeting to hold a public hearing Feb. 9 on this issue.

In the meantime, Gerken and Parnello have asked city staff to locate the original documents dating back to 2000 related to the original plan for the legacy site and Henry’s Switch. Parnello said this will help him understand what the intended purpose was for the land at the time of the purchase and to decide whether a taxable refinance option is in line with those intentions.