Federal bonds available to Ottawa County businesses; work planned

August 14, 2009
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OTTAWA COUNTY — Nearly $52 million in bonds from the American Recovery and Reinvestment Act have been allotted to Ottawa County and most of that total is aimed at stimulating developments in the private sector.

The county has been allocated $20.7 million in Recovery Zone Economic Development bonds for public infrastructure and building projects, along with $31 million in Recovery Zone Facility bonds for new construction, renovation and property acquisition by firms in the private sector.

Ottawa County Administrator Al Vanderberg said one community has informally told the county that it would like the entire public allotment for some infrastructure work. But before the county acts on that request, Vanderberg said he is waiting to learn how many other local units have an interest in gaining a portion of the allocation.

“We put out a notice to all of our 24 cities, townships and one village and let them know this bond amount is available,” he said.

Vanderberg said Ottawa County isn’t really interested in actually issuing the bonds and, like Kent County, is not putting its limited full faith and credit pledge on any applications that are made. He also said the county wouldn’t apply for the RZED bonds because it doesn’t have any projects it wants to finance with the federally backed debt securities.

“But we can transfer the bond amounts to the local units, or in the case of the private amount, to whoever is doing the project. We’ve taken a position that we’re willing to do that,” said Vanderberg.

“We want to see what interest is out there. If it doesn’t exceed the total amount on the public side, then we’ll just bring a resolution to the board that would distribute our capacity to the requesting local government,” he added.

“We haven’t gotten responses from everyone yet, but we have had responses from probably three or four local units that have said they’d probably like some access to that capacity.”

The RZED bonds are good for public infrastructure and building projects and are taxable to those who purchase the securities, which means a governmental entity will likely have to offer an interest rate higher than the usual tax-exempt bonds carry to entice buyers.

The federal government, though, has pledged to reimburse a local unit 45 percent of the total interest it pays to bond buyers; that reimbursement is expected to get the cost for a municipality to borrow the money down to a tax-exempt level.

The county may enlist some help to screen the bond applications that are made by the private sector. Vanderberg said the county could chose from its planning and performance improvement department, the Ottawa County Economic Development Office, Lakeshore Advantage and the Grand Haven Chamber of Commerce to assist county officials with their selections.

“We haven’t set up a formal process such as that yet. We have not heard of any private interest yet,” he said.

The Recovery Zone Facility bonds are tax exempt and can be used by businesses to finance developments that traditionally don’t qualify for tax-free securities, such as a hotel. The bonds are intended to help business owners with property purchases and building projects. It’s not often businesses have an opportunity to finance projects with tax-exempt debt instruments, which have the capability to drop an interest rate by up to two points.

The recovery act designated a total of $10 billion in RZED bonds and $15 billion in RZF bonds nationwide. A county has to declare the area a Recovery Zone to collect the bond allotment. The state has been allocated a total of $1.9 billion for both bonds, which are available through the end of next year.

All 83 Michigan counties have been allotted amounts for both bonds. In addition, seven Michigan cities were allotted bond amounts, but none are in Ottawa County.

“Our next step is to gather all the feedback from the local units,” said Vanderberg. “And based on what we hear, we’ll then bring a recommendation to our Finance Committee as far as how to proceed.”

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