City approves $11M bond, energy finance partner
MARQUETTE — The Marquette City Commission last week unanimously approved issuing a bond of up to $11 million — well over double the city’s usual limit for issuing debt — and locked down a low interest rate on its energy savings improvement project, which is still pending approval.
The $11 million in general obligation bonds for the 2017 fiscal year will be paid off in 15 years.
The city issues bonds annually for capital improvement projects.
The commission Monday unanimously authorized the bond, exceeding a policy that the city not take out more debt than it retires in a given year. Under prevailing conditions, this leads to a debt limit of no more than $4 million for capital improvement projects.
CFO Gary Simpson said the informal policy is about four to five years old.
“This is a lot higher than what we’ve normally been doing,” Simpson said earlier this month. “This is a reflection of the new capital improvement process that we did last year.”
The six-year Capital Improvement Plan — a long-term plan required by the state that lays out necessary infrastructure improvements — maps out projects through 2022.
There are significantly more street projects this year, Simpson added.
“The past couple years, we’ve just been doing SIMP (Street Improvement and Maintenance) projects basically, and now we’re doing some actual reconstructions just because of the conditions the streets are in,” Simpson said.
Projects for the bond include reconstructions of Wright Street, Fair Avenue, Presque Isle Avenue, Wilson Street and a Marquette Brownfield Redevelopment Authority project, among others. Reconstruction can include streets, sewer, water, stormwater and other improvements.
Breaking down the numbers, Simpson said that $2.5 million of the bond will be paid through Lundin road funding and $900,000 will be paid for through a Brownfield agreement to extend Baraga Avenue for the Founder’s Landing project.
Simpson said the bond, which will likely be closer to $10.3 million, might be easier to swallow when taken as an average over the last four years. The city has paid off $18.2 million in debt since 2014, and subtracting the amounts for this year that are expected to be paid by third parties, the city has only issued $15.5 million worth of bonds since 2014, he said.
“So if you look at it straight year to year, it violates the policy,” Simpson said. “But if you average it out, we’re still in good shape.”
In addition, bonds issued for 2009 projects can be refunded, according to city documents. Under current market conditions, potential savings in future debt service for the refunds could be about $173,000 for the remaining life of the bonds.
Commissioner Sara Cambensy thanked staff for the possibility of refunding bonds.
“That’s great news,” she said. “There are a lot of great projects on here. I will be voting yes on it, but if I could let the record show that I’m not in support of the Presque Isle/Fair Avenue roundabout, the Nordic Bay utilities or the Baraga Avenue extension.”
For the energy savings improvement project with Johnson Controls, Inc., the commission also unanimously approved Bank of America in a national competitive bid as the preferred financing partner for the Tax-Exempt Lease Purchase that will pay for the project.
The TELP program is new in the state and will not count towards the city’s overall debt. The city would assume ownership of the assets when the lease term expires.
While the details of the project have yet to be approved, the bids were solicited on a not-to-exceed amount of $23.5 million.
“This does not bind us to this project, but what this does do is locks us into Bank of America,” Mayor Pro Tem Tom Baldini said.
The goal of the project is to identify and fund infrastructure upgrades to city facilities with an emphasis on energy reduction. The upgrades are expected to be self-financing through energy savings generated.
Bank of America’s interest rate came in lowest at 2.74 percent.
“This is a very good rate,” Simpson said. “I’m quite impressed with it. The reason we rushed to do it, the feds were (going to) start increasing interest rates, and we were just (going to) see if we could get away with it, because we closed the bids like an hour before the feds were (going to) announce their next rate increase, and it actually worked to our advantage.”
Cambensy, voting in support, said she supports a cheaper rate but opposes the overall JCI agreement.
Mary Wardell can be reached at 906-228-2500, ext. 248. Her email address is email@example.com.