Convention Bonds On Sale This Week

June 21, 2002
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GRAND RAPIDS — The $86 million bond package for DeVos Place goes to market on Wednesday. But a pre-sale for local investors starts Tuesday.

The City-County Building Authority is issuing the bonds, which will be used to partially pay for the construction of the $219.5 million convention center.

About $52.5 million worth of the package will be sold as 30-year zero-coupon bonds, meaning the payout will come at maturity in 2032. Institutional buyers are expected to be the largest purchasers of those bonds.

Another $33.5 million worth of bonds will be sold to retail investors as current-interest securities, which reach full maturity in 2012. Buyers can purchase these bonds for a shorter term, but at a premium in order to get a higher interest rate.

The projected annual debt service for the package will range from $2.7 million in 2002 to $10.8 million in 2032. Revenue from the Kent County lodging excise levy, or hotel-motel tax, is being used to back the bonds, which will carry an interest rate near 4.96 percent.

“Hopefully, the rate will tail off before we go to market on the 28th,” said Dick Wendt, a partner at Dickinson Wright and Convention and Arena Authority general counsel.

In all, the Building Authority plans to issue about $83 million worth of bonds with nearly $3 million in revenue expected to come from premium sales.

UBS PaineWebber Inc. is directing the sale, which is co-managed by Banc One Capital Markets Inc., Standard Capital Markets, Tucker Anthony Inc. and Robert W. Baird & Co. Local investors can contact one of those firms for more information.

To get the bonds to market, the CAA transferred the title of the building to the Building Authority last week. The Building Authority then leased the structure to Kent County, the entity responsible for the bond payments. Having the county on record for the transaction means the bonds will carry Kent’s triple-A rating and cost less.

The county then subleased the building to the CAA, which will direct the construction of DeVos Place and operate and maintain it when it opens in early 2003. The CAA will keep all revenue from the project. When the bonds are fully paid, the Building Authority will sell the title to Kent County for $1, and then the county will sell the title to the CAA for $1.

“During the time that the bonds are outstanding, the title remains with the Building Authority for legal purposes only,” said Wendt.

Kent County commissioners agreed last week to make bond payments the top priority of all revenue received from the hotel-motel tax. They also agreed to the leasing and subleasing agreements, and then deposited $5 million in an escrow account for the Van Andel Public Museum bonds so there wouldn’t be any outstanding debt attached to the new package.

As for the lodging excise tax, County Administrator and Controller Daryl Delabbio said the county was keeping a close eye on that revenue, and that it has a projection of how much revenue the tax should yield for the next 30 years.

“We believe we’ve done a good conservative job on our projections for the hotel-motel tax,” he said.

For the past seven years, the tax has provided nearly $27 million in revenue. By 2010, or seven years after DeVos Place opens, the annual revenue is projected to top $6.3 million.

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