- change ups
Kentwood Is A Solid Commercial Investment
KENTWOOD — Within the heavyweight battles of commercial lending, this transaction was a complete and utter fiscal knockout. A split decision wasn’t in anyone’s corner.
Bidding on the bonds for the new $9.3 million Kentwood Justice Center drew 10 bids, and the bonds sold at a lower-than-expected interest rate. A few weeks ago, Kentwood sold $9.575 million worth of bonds to McDonald Investments Inc. to finance the construction of the 60,000-square-foot facility.
“What was rather extraordinary is that we received 10 bids. We had people from all over the country interested in this financing,” said Warren Creamer, first vice president in the Public Finance Department for Robert W. Baird & Co., who structured and sold the bond package for Kentwood.
“We were very pleased with the double-A bond rating we received. With the sale of the bonds coming within a trickle of the triple-A range was a big thrill, because I do think it says something about the city and what we are doing,” said Kentwood Mayor Bill Hardiman.
Kentwood Finance Officer Tom Chase, who also chairs the city’s Building Authority, said the city will save almost $43,000 annually on interest payments. He added that initially the city thought it would have to offer a rate around 5.25 percent, but got one under 4.5 percent — 4.478 percent, to be exact.
So why did the bond package draw so much interest and sell for less interest? Creamer felt one reason was that investors were looking more toward bonds because of Wall Street’s recent uncertainty.
“You could call it ‘a flight to quality,’” he said.
But he felt there was another factor that likely had a bigger punch, namely the track record that municipalities in Kent County have for sound fiscal planning.
“Kent County is golden. It is received very well in the marketplace and virtually anything associated with Kent County will sell at somewhat of a premium,” said Creamer. “Kentwood was rated very, very favorably.”
Creamer said the rating agencies met with Hardiman, Chase and other Kentwood officials and found a diverse and strong tax base that is almost equally split between commercial, residential and industrial sources — three segments that seem to have experienced uncommon growth at an equal pace.
The result? Both Fitch and Standard & Poor’s rated the city a double-A — a solid rating, as investment-grade bonds run from triple-B to triple-A.
“There are very, very few triple-A credits in the country. In Michigan, the only triple-As are the state, Kent County and Oakland County,” said Creamer. “I think Ottawa County is now rated triple-A by Fitch.
“Even on a smaller scale, municipality-wise, there are very few double-A credits. You have cities like Ann Arbor, Lansing, Grand Rapids and Kentwood. Then you have a lot of other credits that are double-A-minus. But solid double-As are pretty impressive.”
Creamer said the rating showed potential bond buyers that Kentwood has a strong administration and a good potential for further development.
Those two points are reflected in the city’s master plan, which ultimately envisions a city complex that is more like a campus. There, Hardiman said, residents will be able to meet, interact, relax and even enjoy a latte. The plan is being driven by a prudent — as Creamer called it — pay-as-you-go payment method, which also impressed the bond-rating agencies.
Hardiman told the Business Journal that the Justice Center is just one piece of that plan. Two new firehouses also are a part. One is finished and another is being built. A new library also is in the works, as is a recreational center.
“Those kinds of things are what our long-range vision is,” said Hardiman. “But as for the Justice Center, we’ve been adding staff as the result of a 1999 millage and we don’t have a place to put them.”
The Justice Center is a design-and-build project that will house the police department and the 62B District Court. It came in at about $1 million less than originally expected and should be completed by August next year. Redstone Architects of Detroit designed it and Elmridge Construction of Grand Rapids is the general contractor.
By the way, Kentwood isn’t your father’s, or anyone else’s, little suburb anymore. The city, which is only about 50 years old, grew by nearly 20 percent over the past decade and now has more than 45,000 residents.
“It continues to grow rapidly. It is a desirable place to live and work and do business in, as evidenced by the significant growth in each property classification. The city has been extremely well managed. They are very proactive and forward thinking,” said Creamer. “From the finance standpoint, they are good stewards of the taxpayers’ money.”