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Bond package is urban markets first sale
The Grand Rapids Brownfield Redevelopment Authority successfully sold $2.325 million in tax-increment revenue bonds recently. The authority will use that revenue to finance street improvements around the site along Ionia Avenue SW where the Urban Market, now officially known as the Downtown Market, is being built.
The actual proceeds from the bond sale, which closed June 12, came to $2.245 million, as fees for the various services related to the sale totaled $80,100 and came out of the proceeds. Robert W. Baird & Co. underwrote the sale, which offered an interest rate of 3.85 percent for its 20-year term.
The brownfield authority will use tax-increment revenue generated by the development to pay the bondholders. In addition, the Downtown Development Authority has pledged to pay the first $75,000 of the annual debt service, which has semi-annual payment dates, and then create a reserve equal to three years’ worth of annual debt service. To that end, the DDA has set aside a beginning reserve of $500,144 that will rise as the bonds mature.
“It doesn’t appear to be impacting their fund balance badly,” said Jana Wallace, DDA treasurer, of the account that is projected to be roughly $3 million for the next several years.
The first bond payment totals $74,223 and is for interest only. Half is due Dec. 1, with the other half having to be paid by June 1 of next year. An interest-only payment is also on tap for the second year with the same payment dates and a total of $76,562.
Both principal and interest payments will begin in year three and will average about $176,000 annually until the bonds reach their term. After 20 years, all the payments will total $3.3 million if the issue isn’t refunded before total maturity. The bonds are callable after 10 years.
The bonds the brownfield authority sold will cover most of the cost to improve six blocks around the 3.5-acre site that will be home to the market. The work involves reconstructing Ionia Avenue and Logan and McConnell streets. The water and sanitary sewer systems also will be replaced, new street lights will be installed and electrical lines will be buried.
Georgetown Construction Co. is managing the project, which is expected to cost $3.28 million. The cost includes $350,000 set aside as a contingency account. The DDA’s share of the work is $886,000, while the city’s sewer and water funds will contribute $2.3 million to it. The Grand Action Committee, which is co-developing the market with the DDA, has pledged $35,000 to the infrastructure work.
DDA Executive Director Jay Fowler said there is a phase two that involves putting in new sidewalks, planting trees, adding bike lanes and a few other improvements. Payment for that work will hopefully come from a $400,000 transportation improvement grant for which the city has applied.
Much of the environmental work that has been done to the site has been paid for by a $1 million grant the city’s Economic Development Office received from the state Department of Environmental Quality. The brownfield authority also contributed $200,000 to the clean-up from a revolving loan fund the agency received from the U.S. Department of Environmental Quality. About 35,000 tons of contaminated soil have been removed from the property.
“This funding is a significant boost to the project and will allow our private fundraising effort to focus exclusively on building the market rather than cleaning up the site,” said Jon Nunn, executive director of Grand Action, when the funding was announced earlier.
The city’s Parking Services Department also awarded the project $200,000 for the construction of a 33-space surface lot adjacent to the market.
The Downtown Market is expected to cost from $27 million to $30 million to build. In addition to the fundraising effort the Grand Action Committee is undertaking, the project should get $5.2 million in tax credits from the state’s brownfield program. The tax-increment financing through the brownfield is expected to eventually yield $3.3 million.
The DDA bought the property in 2008 for $2 million and is leasing the site to the market’s for-profit entity, Urban Holdings Inc., for 99 years at $1 annually. Construction has begun on the project, and the year-round, indoor-outdoor market is tentatively set to open in about a year.
A feasibility study commissioned by Grand Action projected the market would have an economic impact of $775 million over its first decade of operation and would create about 1,000 new jobs.