The City of Tacoma is considering an amendment to its Local Improvement District (LID) agreement with the developer of Point Ruston, a master-planned residential community and urban village built on the former Asarco smelter site, that would allow the city to advance $3 million to the developer in order to address a budget shortfall related to the first two phases of the project’s public infrastructure.

According to Tacoma City Manager Eric Anderson, under the current LID agreement, the developer, Point Ruston LLC, would complete the LID and then be reimbursed through LID assessment bonds issued by the city. Those bonds are repaid by property owners through annual assessments on their properties. Under the proposed amendment, however, the city would advance the money to the developer to pay for the first two phases of the LID. The first phase involves the infrastructure for sewer, water, and power. The second phase involves the infrastructure for the roadway, street lighting, and stormwater drains. Additionally, a third LID phase would be introduced to address construction of the seaward 50 feet of a 100-foot-wide, 4,400-foot-long shoreline esplanade to be completed by the end of 2012. Approximately $1.9 million would come from the city sewer fund, and approximately $1.1 million would come from the city’s surface water fund.

Anderson briefed councilmembers on the plan during council’s noon study session today. He also discussed the issue during council’s committee of the whole meeting on March 1.

“We would be reimbursing the developer $3 million prior to the sale of the bonds and then, when the bonds are sold, we would be reimbursed,” said Anderson during last week’s meeting. “Why do this? Frankly, to ensure the completion of the public infrastructure at Point Ruston and keep the project going forward.”

He reiterated these points during today’s meeting.

The LID amendment could appear on city council’s agenda as early as March 22. If so, it would be the second time the LID agreement has been amended. On Oct. 20, 2009, city council unanimously approved an amendment that increased the LID financing from $11 million to $15.5 million.

Advancing LID funding is only one part of a plan related to Point Ruston. On Friday, the Tacoma Daily Index was first to report (Point Ruston waterfront for sale? Tacoma says it’s interested, TDI, 03/04/11 — http://www.tacomadailyindex.com/portals-code/list.cgi?paper=88&cat=23&id=1936374&more=0 ) the city is considering a deal with the developer to purchase an eight-acre, 100-foot-wide swath of the Commencement Bay shoreline stretching from Ruston Way to Peninsula Park for $6 million. Under the plan, the city would seek protection from any environmental liability related to the property by negotiating an indemnity agreement with the developer and the Environmental Protection Agency (EPA) so that the costs of cleanup continue to be borne by Point Ruston or the Asarco bankruptcy settlement — not by Tacoma. Point Ruston and the waterfront esplanade are part of a superfund site purchased by the developer in 2005. The developer and EPA have worked together on cleaning up the toxic land. “We would not want to have something go wrong at Point Ruston, have the developer not be able to finish it, leave half of it unremediated, and all of a sudden, because we own the waterfront, we have to remediate it,” said Anderson last week. “We want to avoid that. That’s basically what this effort is intended to do.”

Anderson told councilmembers he saw the plan as an opportunity to own an important piece of waterfront property. If the city owns the property, according to Anderson, the charter preserves it as city-owned waterfront that can’t be sold without a vote of the people, and owning this stretch of waterfront — one-fourth of which is in Ruston — in perpetuity is a principal motivation.

Still, Anderson said today the city would need to discuss the plan and any indemnity agreements with EPA. The city would also need to have the waterfront property appraised.

During today’s study session, Point Ruston LLC’s Mike Cohen disagreed with labeling the proposed action as an advance. “We’re asking for modifying the agreement in reality of what’s happening on the ground,” he said. Cohen added that the $15.5 million LID cost has now climbed to $22 million and the $3 million LID amendment along with the $6 million waterfront sale to the city was an extremely creative approach that helps to bridge the budget shortfall.

Councilmember Ryan Mello joined most of his colleagues in supporting the plan. However, he noted a purchase-and-sale agreement could not go forward without EPA’s approval. “What if it takes 18 months to two years?” Mello asked. “EPA is not the quickest agency in the world. Meanwhile, cash flow is of the essence. I’m very concerned about that aspect of our deal in order to keep the momentum going.”

“It is a very real concern,” said Anderson. “The kind of protection we are looking for and need means we have no relationship with the developer. If we move to actually take an action that in any way, shape, or form assumes ownership before EPA has given approval, we may never be able to get that approval and not be able to go forward. [We need to] begin the discussions with EPA and then go forward from there. Obviously, we are going to have to keep track of this. If it takes 18 months, we are going to be in trouble. We need to approach [EPA] as a separate party in a straight-forward way and gauge the response and keep an eye on it.”

“I still want an understanding from the city and the developer about what are the consequences if the six-million dollars aren’t freed up during this construction season,” Mello added.

Councilmembers directed Anderson to contact local EPA officials and prepare the paperwork necessary for the $3 million amendment to the LID agreement. They also asked for a proposed schedule of amendments and reimbursements.

“I think we do need to see the sequence of dollars and agreements so that we can understand there’s a path forward that leads in the end of construction of the esplanade at the end of 2012,” said Councilmember Jake Fey. “Otherwise, it will be another cost for us downstream.”

For a copy of the presentation from Tacoma City Council’s committee of the whole meeting on March 1 and today’s study session, click here — http://cms.cityoftacoma.org/cityclerk/Files/CouncilCommittees/Handouts/2011/COWHandouts/COW_20110301handouts.pdf .