GR May Seek Bonds For Revenue

August 18, 2008
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GRAND RAPIDS — The city is getting ready to go to the municipal bond market as commissioners gave their approval last week to begin the process of selling three packages that could net the city as much as $66 million in revenue.

One would be worth up to $35 million and would refund a portion of the bonds issued in 1994 by the Downtown Development Authority that paid for most of the construction of Van Andel Arena.

That serial bond was worth nearly $55 million and refunding the security could save 20 percent of the present-day net value because interest rates are lower now than when the original bonds were issued 14 years ago.

Refunding could save the DDA more than $6 million over the remaining 16 years of the 30-year debt. The current bond had an outstanding principal of roughly $28 million. Its remaining principal and interest total about $50 million.

“The savings are shared between us and the state,” said City Chief Financial Officer Scott Buhrer.

The DDA was set to sell the bonds to the Michigan Municipal Bond Authority late last year. But the sub-prime mortgage crisis negatively impacted the financial markets, which resulted in the MMBA’s New York-based bond insurer having its rating lowered. So the city decided to sell the bonds on its own in hopes of getting a lower interest rate.

Should the city go ahead with the transaction, the refunding bonds would be issued for 16 years as general obligation bonds at an average interest rate not to exceed 5.5 percent per year.

The DDA uses the tax-increment revenue it receives to pay bondholders on a semi-annual basis.

The city’s building authority may issue bonds worth up to $24 million for two parking ramps that Parking Services plans to build as part of two private developments going up downtown. One is a 262-space ramp in The Gallery on Fulton project at Division Avenue and Fulton Street being built by Two West Fulton LLC. The other is a 400-space ramp in Locus Development’s “Thirty-Eight” project at Commerce Avenue and Weston Street.

Buhrer said parking fees would be used to make the bond payments.

The city could also issue $7 million worth of capital improvement bonds to pay for a property at Logan Street and Ionia Avenue that Buhrer said the city bought in December and to build a surface parking lot on the site, to buy two pumpers for the fire department, and to pay for the purchase of a building the city bought at 235 Market Ave. SW.

The city agreed to purchase the NAPA Auto Parts store from the Genuine Parts Co. of Atlanta for $625,000 last month and plans to add it to its 16-acre Public Works Island, which is home to multiple city departments and is just north of the store at 201 Market Ave. SW. The auto parts store has 10,000 square feet, while the entire parcel is 29,000 square feet.

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