Port considers usage of proceeds from Commerce Building Center sale in Lacey to pay off debt

With $9,596,556 secured from the sale of the Commerce Building Center (CBC) in Lacey, the Port of Olympia is now considering how they could use the money to pay off its debts.

Port Finance Director Tad Kopf briefed the Port Commission on Tuesday, May 28, about three potential options on how they could invest the money.

The director explained that they are discussing the issue as the port will need to pay $9.6 million for debt payments in 2026. He described the 2026 payment as a “balloon payment” as it is double the amount the port must pay for in debts this year and the next.

Within that large sum, more than half, or $5.33 million of it, comes from a single bond obligation that the port issued in 2016. Called the 2016B LTGO Bond, this was the very bond used to acquire the CBC itself and funded improvements at the Cleanwater Center.

Kopf said that the first option is for the port to invest $5,195,586 into an escrow fund which would mature as they have to make the payment in 2026.

Scott Bauer from Northwest Municipal Advisors further explained that the investment would go towards the US Department of the Treasury which generates an interest of 5% in the short term.

By 2026, the payment due for 2016B is $5,325,000, so the port will save $569,547 by pursuing the option.

The second option is to invest $7,595,656 to eventually pay off 2016B and also a portion of 2013B so that the port would not need to continue paying the bond in 2027. A portion of 2013B would still remain as a payment to be made in 2026.

The 2013B bond has been used for dredging and environmental disposal, according to Kopf’s presentation.

Kopf said that staff is recommending the second option as it brings “maximum impact” while also offering “maximum flexibility.”

The third option is to use all CBC funds so the port can pay the entirety of 2016B and 2013B.

The port saves $915,809 and $1,097,733 for options two and three, respectively.

Bauer mentioned that the savings they calculated for the presentation did not account for interest that the port would have earned if they just kept the fund in a bank.

Remainder of CBC funds can be used for alternative uses

The port approved the sale of the CBC, a cluster of three warehouse buildings on Willamette Drive, to 1892 Holdings LLC in December 2023.

For options one and two, a portion of the CBC sales proceeds will remain which the port can use for alternative uses.

Later in the meeting, port staff briefed the commission about a budget amendment they can make to fund the continuation of the investigation of Budd Inlet and to buy mitigation land with Tumwater as part of the habitat conservation plan these two parties are developing. Both amendments would cost the port $2 million each.

Asked by Commissioner Jasmine Vasavada why they were discussing these debt reduction options now when they will only further discuss the budget in the coming months, Kopf said that waiting will cost them time to earn more interest from the investment, especially since the timeframe of the investment is short.

The commission will discuss these options once more on June 10 when they will vote to approve which option to pursue.

Combining all its bond obligations and loans, the port has $30.1 million in debts, which it plans to pay over several years.