Brownfield Authority OKs Urban Market bonds
The Grand Rapids Brownfield Redevelopment Authority recently gave the highly anticipated Urban Market project being built by the Downtown Development Authority and the Grand Action Committee a fiscal shot in the arm.
The authority agreed to sell bonds worth up to $2.35 million that will be used to prepare the 3.5-acre site on Ionia Avenue SW for construction, which has been estimated at costing between $27 million and $30 million. The term can be no longer than 21 years, and the projected interest rate is 4 percent per annum.
The Robert W. Baird Co. will serve as the bond’s underwriter and the Bank of New York Mellon Trust Co. will be the registrar and paying and transfer agent. The bonds are likely to go on sale in mid-June. Baird’s discount can’t exceed 1 percent.
The sale could have happened earlier, but the authority wanted to wait until the construction bids were in, which should be shortly, and until it’s known if the project will receive an enhancement grant. The DDA is expected to pay the annual $75,000 debt service for the first two years; then the payment will be made from the property’s tax-increment revenue. The DDA will take up the matter this week.
“It’s been a very challenging deal because of all the people involved,” said Jana Wallace, city debt and authority finance officer, who also serves as the DDA’s treasurer.
It’s not certain how much revenue the property will generate, but the DDA will capture the revenue before Urban Market Holdings LLC, the project’s developer, does. The DDA’s revenue will come from the city and the Interurban Transit Partnership millages. The brownfield authority will capture portions of other millages that are related to the site.
Counsel Dick Wendt said the city will pledge its full faith and credit to the bond so the authority can get a good interest rate. “But we never want to hit the city’s general fund for payment,” said Wendt.
The buildings on the site have been razed, and city commissioners are expected to approve the construction contract in mid-May. The market should open in summer 2013.
“Everybody seems pretty comfortable with this. All the t’s are crossed and the i’s are dotted,” said Terry Nicholas, who chairs the authority.
But the authority could be facing an uncomfortable revenue situation if state lawmakers either eliminate the personal property tax or reduce it. Wallace said if either happens, the board will take a sizable revenue hit because much of its tax-increment financing comes from industrial properties, and the industrial leg of the three-legged tax is the one most talked about being wiped out.
Wallace said the authority’s property values will stay the same, but the current values won’t, and that scenario will result in negative revenue values for the board.
“We feel that if we don’t do anything, we don’t know what we will get,” said City Commissioner Walt Gutowski, also a board member. “So we’ve come up with seven solutions.”
The city has shared those solutions with Lansing lawmakers in hopes of alleviating at least some of the revenue loss expected to come from whatever alterations are made to the tax.