Communities save with refinanced bond

By: Kristyne E. Demske, Kevin Bunch | C&G Newspapers | Published March 19, 2014


Local municipalities will save more than $1 million with the refinancing of drain bonds by the Drainage District for the Lake St. Clair Clean Water Initiative Drain.

According to Macomb County Public Works Commissioner Anthony Marrocco, the refinancing of $14.3 million in drain bonds will result in a savings of more than $1.5 million over the payback period ending in 2029.

William Misterovich, chief deputy for the Macomb County Public Works commissioner, said the department’s financial consultant notifies his office when they see the possibility of a refinance. The drain board for the Lake St. Clair Clean Water Initiative Drain also approved the change.

The intercounty drain involves multiple communities: St. Clair Shores, Roseville and Eastpointe. The savings will be reflected in the next bill to the communities from the county, Misterovich said.

“That’s quite a bit of money” saved, he said. “Everything has to work and make sense economically in order for us to pursue it.”

In St. Clair Shores, Department of Public Works Director Bryan Babcock said there was initially a sanitary relief sewer installed along Jefferson Avenue with the money because the sewers along the street were not large enough to handle the capacity needed.

“Since that time, we’ve also been using these funds to improve our sewer system throughout the city of St. Clair Shores, and it’s actually funded by a millage that our residents had approved back in the ’90s,” Babcock said.

In 2013, the city also used the money to replace a sanitary lift station, which cost $1 million.

St. Clair Shores will save $80,498 per year and $1.3 million over the life of the bond. Roseville will save $7,825 per year for a total of $125,202 and Eastpointe will save $5,536 each year for a total of $58,583. Macomb County also will realize some savings.

The two 2004 bond series had an average interest rate of 4.37 to 5 percent; the new interest rate is 3.58 percent.

Series A of the bonds included all three communities, while Series B only encompassed St. Clair Shores, Misterovich said.

“St. Clair Shores would naturally derive a better benefit … because they were more on the hook,” he said. “Because they were charged more, they get more of a payback.”

Roseville City Controller Bob Cady said the county handled all of the work in his community, with the bond money being used to handle maintenance of the drain system. While the amount allocated for the bond changed year-to-year, Cady said it typically fell between $106,000 and $110,000.

“Under the new scenario, it will go between $99,000 and $104,000 at the most, so it looks like an average savings anywhere from $7,000-$8,000 a year from now until 2029,” he said. “It’s definitely a savings.”

The total overall payment for Roseville’s share is estimated to go from $1,832,000 to $1,628,000, Cady said. He said the extra money should help for the city’s drain fund reserves, which are financed through a 1-mill millage, and in the long-term could help the city reduce expenses or remove the millage entirely near the end of the bond’s life.

Eastpointe Finance Director Randy Blum said the overall Eastpointe portion is $845,600 following the refinancing for the project.

Blum said that only this one of several project bonds from the wider Clean Water Initiative — for the sanitary sewer relief line — was refinanced at this time, though other portions have been in the past.

“They refinanced a chunk in 2010 that was from a 2001 bond, and chunks from 2002 bonds were refinanced in 2010,” Blum said. “This one was a 2004 bond that was refinanced, so they’re doing it as interest rates have dropped.”

He said, in theory, this means the city could reduce its millage rate eventually, but as the county adds new drain projects and adds new debt, the savings will ultimately be mitigated and will end up virtually unnoticeable to residents.

Babcock said the refinance means the payments the city has to make to repay the bond will be less: something he said was great news for taxpayers.

“We appreciate working with the Public Works Office on this project because it’s vastly improved our sewer system throughout the city and we have much less sewer backups, flooding and discharges to the lake,” he said.