Kent Might Buy Other Properties
At least two deals are definite: A trio of parcels that make up 1.25 acres of riverfront property along Monroe Avenue between Michigan and Trowbridge streets, and the office building at 82 Ionia Ave. SW.
The county will buy the Monroe land from Frank Freund, an East Lansing executive, for $2.45 million, and pay $5.5 million to the real estate firm owned by the Peter Secchia family for 82 Ionia. Those purchases come to just under $8 million.
Kent County Administrator and Controller Daryl Delabbio told the Business Journal the value of the bonds would be at least $8 million but wouldn’t exceed $16 million, and the life of the package would be for eight years.
A significant bond value above $8 million will likely mean the county will buy some other parcels. Sites near Millennium Park and downtown are being considered.
“We may be buying some more property on Monroe North,” said Delabbio.
County commissioner Harold Voorhees was one of two board members who voted against the bond package. Voorhees said he felt the county should dip into its reserve account rather than issue a debt instrument. But county officials didn’t see it that way.
Delabbio said there are a few reasons why the county is choosing to go the debt route.
One is Kent can borrow money now for 2.5 to 2.75 percent per annum, a rate that has a good chance of being lower than the return the county will get on its investment portfolio in the years ahead.
“At that point in time, we will be investing money at a higher rate than we will be paying off the bonds for, sometime in the course of the next eight years,” he said.
Another reason is borrowing the money preserves some of the county’s fund balance, a move the bond-rating agencies appreciate.
Third, the county is far from the legal limit of debt load that it can carry.
“The state constitution says we can’t have debt beyond 10 percent of our assessed value. Well, we’re at 2.1 percent,” said Delabbio.
The county has leased 72,000 square feet of space in 82 Ionia since 1998 for Friend of the Court, the prosecutor’s office and Circuit Court Probation. The five-story structure, known as the Furniture Building, has 113,000 square feet and was 80 percent occupied at the end of last year, according to the Building and Owners Management Association.
Kent almost bought the building last year for $5.2 million. But the county changed its mind, saying it would do so at its next available option in 2005. The county didn’t follow through on the initial purchase because there wasn’t enough time to renegotiate the six subleases in the building before the transaction was scheduled to close.
At that time, the county planned to make $800,000 worth of improvements to the building.
As for the Monroe North property, Delabbio said the county didn’t have an immediate use in mind for it. He added that the site was large enough for a new administration building; something the county might consider building in eight to 10 years. In the meantime, Kent may temporarily use the property for an employee parking lot, as it owns a lot directly across Monroe from the land.
It’s almost certain, though, that the Monroe property contains contaminated soil, as most parcels along the Grand River do. State law would allow the county to cover the site for a parking lot. But if a foundation had to be dug for a new building, the soil would have to be hauled to an approved landfill.
There is one near Coopersville, where the Convention and Arena Authority sent the excavated soil from the construction of DeVos Place. Hauling the soil from downtown to a landfill adds expense to a project.
But if a baseline environment assessment (BEA) does show the Monroe site with contaminated soil, Delabbio didn’t think that would stop the county from closing on the parcels.
“We don’t think so. We are protected with the BEA, though,” he said.
Delabbio hopes the county will get the BEA report before the bond resolution goes before the full board of commissioners on May 13.