City Getting A Bond Aid
GRAND RAPIDS — Because interest rates have fallen and the city sees potential savings in refunding three bond series, the Grand Rapids Building Authority authorized a refunding process last week that will put up to $35 million worth of municipal bonds on the market.
City commissioners gave their OK to that move earlier.
“The market conditions are right so this makes sense,” said Jana Wallace, debt and authority finance officer for the city.
“It still has an economic benefit for us,” said city Chief Financial Officer Scott Buhrer.
But the bonds will only be sold if the city can reap net-present-value savings in its debt service of at least 5 percent. If that number can’t be reached, the refunding effort will stop.
“We won’t move forward unless we have a net-present value of five percent or more,” said Wallace.
Buhrer, though, felt confident the city could attain that savings amount.
“The last time I looked, about ten days ago, (the savings) was at 4.95 percent,” he said.
The bonds financed three buildings projects; $2 million for the first phase of the city’s archives center at 233 Washington St. SE; $25.5 million for the city police headquarters at 1 Monroe Center NW, and $14.6 million for the Ottawa Fulton parking ramp at 50 Ottawa Ave. NW. The bonds were issued in 1999, 2000 and 2001, respectively.
But unlike the refunding of the arena bonds that the Downtown Development Authority is undertaking, the city doesn’t have a buyer for its series. The Michigan Municipal Bond Authority is buying the DDA bonds, which provided $55 million for the construction of Van Andel Arena over a decade ago. The DDA expects to save $5.8 million in debt service from the sale.
Wallace, who is also the DDA’s treasurer, told the Business Journal that having a buyer in place is an exception to the rule. She said most municipal refunding efforts go to market in a manner similar to initial public offerings. In the DDA’s case, Wallace said the state offered to buy the arena bonds.
Buhrer said there are a number of retail buyers interested in the city’s bonds. He expects the sale to close late next month and the city to save $1.4 million from the transaction.
The total amount to be refunded isn’t certain, but the issuance could go as high as $35 million.
“We’re not refunding every single year of the issues,” said Wallace. “We’re not calling them, we’re advance refunding.”