City Center II project

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By Rou Weng
Entirely East Lansing staff writer

To avoid default, the city of East Lansing is looking for ways to refinance its 5.4 million BANs due April 1. However, city council members were split on whether to choose a short-term refunding method or a long-term commitment.

“It was a mistake,” said Don Power, a city council member. He said that the project was too big for the city and questioned the actual need for the parking ramp. He was concerned about whether the developer had enough funds to complete the project.

Power preferred a long-term commitment. Considering the unclear domestic economy and global changes, he thought that it was unwise to sell the property. “We’ll lose money anyhow,” Power said, “but the point is how to limit our loss.”

Nathan Triplett supported refunding the notes for the short term. “The option gives the city more flexibility,” Triplett said. “We don’t need flexibility if we have confidence in the project,” said Power.

There are several points in determining refinance methods of the notes. Mary Haskell, finance director of the city, said that the methods highly depended on the anticipation for the future of the project. Haskell said that interest rate was another critical point, especially when interest rates are in their historical lows, currently.

Basically, there are two kinds of municipal bonds — tax-backed bonds and revenue bonds — issued by state and local governments.

The $5.495 million Downtown Development Bond Anticipation Notes issued by the city were Limited Tax General Obligation bonds, which is a limited tax pledge because, for such debt, there is a statutory limit on tax rates that the issuer may levy to service the debt.

The East Lansing Downtown Development Authority used the BANs to purchase five properties on Evergreen. The BANs will be due on April.Haskell said that the city council has decided to refinance the bonds for the short term. She was given authority to work with Robert W. Baird & Co. to choose the lowest cost refunding method for the city.

Issuing DDA Revenue Bond is considered one option for refinancing the BANs.

However, Eliot Singer, a resident criticizing the City Center II project, expressed passive opinions on the revenue bonds in his latest article. According to Singer, there is little possibility for bond market to buy such high-risk revenue bonds.

“We are waiting for the developer to provide a viable financial plan for the project,” said Haskell.

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