City sells bonds for downtown improvement project

Thu, Oct 15, 2009    to del.icio.us

A part of the U.S. government's federal stimulus plan will be stimulating the city of Grand Haven.

The city has officially begun selling bonds that are aimed at financing the infrastructure improvement projects around the city's downtown area. The sale began in late September.

"We wrote this bond specifically for the infrastructure and the streetscape of the downtown project," City Finance Director Jim Bonamy said.

Bonamy said items that will be covered by this bond issue include assets with a physical life of 25 years — such as infrastructure being placed below city streets; as well as sidewalks, lighting and a snowmelt system for the sidewalks.

The $5.6 million in taxable bonds were issued by the city as Recovery Zone Economic Development Bonds (RZEDBs), pursuant to the American Recovery and Reinvestment Act of 2009. The U.S. stimulus act allows certain municipal issuers to issue RZEDBs for improvements within a recovery zone — which is defined as being an area suffering from significant poverty, unemployment, foreclosure or general distress.

During an August meeting, Ottawa County commissioners approved a resolution designating the city of Grand Haven as a recovery zone for purposes of obtaining RZEDBs for the Washington Avenue project. This approval came after City Council voted 3-2 in support of the county designation.

The city will receive a federal subsidy of 45 percent of the interest cost, which will provide for lower-cost financing than traditional borrowing methods, Bonamy said.

"It acts in the same way as a contractual basis between the parties," he explained.

Bonamy said the city has the assurance of the government that they will take care of their end of the agreement.

The interest rate on the new bonds is a little more than 3 percent; traditionally, the rate of interest on municipal bonds is about 4 percent, Bonamy said.

"Our local cost is going to be about $7.8 million," he added.

The city is expected to save about $1.4 million in expenses over the course of the life of the bonds.