Grand Rapids to ask for more ARRA bonds
Grand Rapids city commissioners allocated $16.6 million in American Recovery and Reinvestment Act bonds last week and also gave city CFO Scott Buhrer their approval to ask the state for another $10 million in ARRA bonds for sewer and water projects.
“We certainly have plenty of projects that we can apply to this,” said Jana Wallace, city bond officer, of the request. “The Michigan Finance Committee is pleased we’re asking for this.”
Commissioners allocated the remaining $7.6 million the city had been allotted in Recovery Zone Economic Development bonds. The securities will be sold to help defray the cost for the city’s ongoing separation of its sanitary and stormwater sewer system, work that has moved east of the Grand River, along with other water and sewer projects. Because the city has a lot of infrastructure work on its to-do list, it is asking the state to increase its RZED allocation of $16.7 million by another $10 million.
The RZED bonds are taxable public sector securities, and the federal government will reimburse the city for 45 percent of its interest expense. The interest rate on these bonds is normally higher than the going rate on tax-exempt municipal bonds. The higher rate is attractive to buyers who aren’t looking to reduce their tax load because it gives them a bigger return for their investments than tax-exempt securities. And the interest reimbursement from the federal government lowers the city’s interest payment to a level that is often below the market’s charge for tax-exempt bonds.
The city has already sold $1.77 million in RZED bonds for the renovation of its building at 1120 Monroe Ave. NW and $7.32 million for the new parking ramp that Parking Services owns and operates at the Gallery on Fulton development. “So we have some history with these bonds,” said Mayor George Heartwell.
Heartwell said the city has spent roughly $220 million on the sewer separation project that began on the city’s west side in the early 1990s. He added that 93 percent of that total has been funded by city taxpayers, while state and federal grants accounted for the remaining 7 percent.
Besides the public-sector ARRA bonds, commissioners also allocated $9 million of its allotment of ARRA private sector, tax-exempt bonds to Health Park Central LLC for a new $15 million medical office building planned for 245 Cherry St. SE. The city’s total allotment of these Recovery Zone Facility Bonds is slightly more than $25 million.
The city has already allocated $12.5 million of that total for the historic renovation of the former Federal Building at 148 Ionia Ave. NW, which the Christman Capital Investment Group LLC is undertaking for Ferris State University and Kendall College of Art & Design.
Commissioners also allocated $4 million from that ARRA pot earlier this year to an Ohio firm that wants to build an office building on East Beltline Avenue for federal agencies such as the Social Security department. But that project apparently didn’t qualify for RZF bonds, and city officials told the Business Journal they are looking into the matter. So for now, the city has $3.58 million left in its allotment.
“That balance is being called back by the state,” said Eric DeLong, deputy city manager. “It’s available for economic development projects. There are some limitations — very few. A project has to be of a certain size to make it viable.”
All allotted ARRA bonds have to be allocated by the end of business on Friday, a requirement that comes from a state law that was approved this summer. Those that aren’t allocated will go into the state’s ARRA coffer for either redistribution to cities or counties that can allocate the securities or to projects the state has on its agenda. All ARRA bonds have to be sold by the end of this year, unless Congress extends the deadline before then.
Kent County was allotted $36.57 million in RZED bonds and $54.85 in RZF bonds. County Administrator and Controller Daryl Delabbio said the county has allocated $32 million of the RZED bonds for the jail renovation and $41 million of the RZF bonds for the Avastar Park project in Walker and the downtown Federal Building. The county and the city do not take on a financial responsibility for the private sector bonds that are sold.
The state was allotted $773 million in public-sector RZED bonds and $1.15 billion in private-sector RZF bonds.