Kent County Debt Goes On Sale Soon
GRAND RAPIDS — Oppenheimer & Co. Inc. will underwrite the bond packages that Kent County commissioners approved for property purchases recently, and the bonds are expected to go to market on Sept. 22.
The county has already closed on two of the three properties that the up-to-$16-million worth of bonds will finance.
Kent acquired three parcels totaling 1.28 acres of riverfront land on Monroe Avenue NW just north of Michigan Street from a group led by an East Lansing businessman for $2.43 million. The county also purchased two parcels at Ottawa and Lyon NW, the site of the courthouse, for $3.27 million through a settlement with the former owner.
The county will close on the third property, an office building at 82 Ionia Ave. NW, next February. Kent has been leasing 72,000 square feet of space in the 113,000-square-foot structure since 1998. The county will buy the building from a real estate firm owned by the Peter Secchia family for roughly $5.5 million.
The bonds designated for the Monroe and courthouse properties are reimbursements to the county, as Kent has bought both with cash.
Although the county will be paying interest on money it has already spent for those purchases through the bonds, officials want to go this route because they feel they will get a higher return on their investments down the road than what the interest will cost them in payments to bondholders.
“Even though we are going to pay some interest, it’s low interest, and we expect that near the end of the bonding period we will be actually earning a little more interest than we are paying,” said County Administrator and Controller Daryl Delabbio.
The county had another reason to pay itself back for two of the acquisitions.
“The other thing is we do have some Millennium Park properties that we want to acquire. By putting money back in our fund balance, we will be able to use that money to buy these properties without bonding,” explained Delabbio.
But a few commissioners questioned whether the county should issue debt instruments for properties it has already purchased.
Commissioner Dick Bulkowski said using tax-exempt bonds to buy the Monroe parcels means the county wouldn’t be able to sell the land on the east bank of the Grand River to a private developer for five years. He wondered whether it was wise for the county to put itself in a position where it wouldn’t be able to act on an offer that may have a potential to double or triple the county’s investment.
Commissioner Harold Voorhees said by issuing bonds, Kent was digging a deeper debt hole for its residents.
But County Fiscal Services Director Robert White said Kent was well below its legal debt limit. State law allows counties a debt load equal to 10 percent of its total State Equalized Value (SEV). The SEV for the county is $20 billion, so Kent can legally carry outstanding debt worth $2 billion.
White explained that with the new bonds the county will have $6.33 million of debt to service next year, which works out to be 4.3 percent of what the county will spend from its General Fund.
“It’s still a rather small part of your General Fund spending,” he said.
White also said the city has to reimburse the county $1.55 million of the $4.57 million annual cost for the courthouse, which accounts for a majority of the county’s $6.33 million debt load. The city is picking up a third of the courthouse tab for its district court system.
In all, White said the county would be carrying $81 million in debt next year.
The bonds will be issued in two series. The Monroe series will have a term of eight years, while the other will last for 20 years. The bonds will be issued in denominations of $5,000 and multiples and the issuance has a limit of $10.5 million in value.
A portion of 82 Ionia can’t be purchased with tax-exempt debt and the county plans to finance that part with $753,000 from its capital improvement fund.
The county hasn’t announced a use for the Monroe parcels yet, but the property is large enough for a new administration building.
Delabbio said the county isn’t actively seeking any more downtown properties and has put a potential purchase on the back burner for the time being.