Eastpointe signs off on rec center expansion loan

By: Kevin Bunch | Roseville - Eastpointe Eastsider | Published March 12, 2014

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EASTPOINTE — The Eastpointe City Council signed off on lending up to $900,000 to the Recreation Authority of Roseville & Eastpointe (RARE) at its meeting March 4 for the expansion and repair project at the recreation center on Sycamore Street.

The move was approved in a 4-1 vote, with Councilwoman Wendy Richardson voting no. She cited her general opposition to having a combined recreation authority with the recreation center in Roseville as the reason for her no vote, though she added that she did not like the idea of lending the money, as it would put added restrictions on dissolving the joint authority.

City Manager Steve Duchane, who also sits on the RARE board, said the authority has already approved spending $1.5 million of its own money for the work and was interested in getting additional funds from the two cities, when needed, to complete the work. Councilman Bill Sweeney likened it to a home credit line.

“It’s like how homeowners would have a credit line of a maximum amount: We’re not necessarily going to the maximum amount — it’s just that it’s there,” Sweeney said. “We’re not cutting police or fire services; it’s nothing connected to that,”

The authority collects 1 mill for operations from taxpayers in both cities, so it has a steady income stream, Duchane said. This was effectively an advance on money it would already be getting and that it would pay back with a greater interest rate than the loaned funds currently get in the bank.

Finance Director Randy Blum said that, for the large part, the money currently is getting a 0.4 percent interest rate in the bank, whereas RARE is offering a 2.75 percent interest rate. The money would come from the city’s water fund, which Sweeney said is solvent.

The money would be drawn from both cities’ accounts equitably, Duchane said, and each time the money would be needed, both councils would need to vote to approve it. The final cost of the project will not be known until it goes out for bid, but initial engineering estimates have it around $3.2 million, he said.

“If it’s $3 million, the first $1.5 million (from RARE) is set aside,” Duchane said. “The authority would need the other half at the completion of construction, which could be 24 months out.”

The repayment period would have to be within five years from the initial loan payment, under state law. Duchane said if Eastpointe did not approve it, Roseville indicated it would loan out the balance of the project.

Councilman Ron LaForest brought up the possibility of a default and what impact that would have on repaying the loan. Duchane reiterated that RARE is solvent with its millage, possibly more than either city, but in the event of a default, both cities own 50 percent of all assets and could take legal action to get the money back.

“It would be very speculative at this time,” he said. “There’s no chance of default on the recreation authority’s part.”

Several members of the public were wary of the project. Resident Kevin Grand pointed out that the council had delayed the vote by a month so it could look for additional safeguards in the agreement to protect taxpayers from being on the hook for more money, and he said the agreement as presented March 4 was identical to the version at the previous meeting. Duchane said the city’s legal counsel found the agreement would not expose taxpayers to any greater financial burden than the existing millage.

Roseville’s City Council approved its own side of the loan agreement Jan. 28, which was then accepted by RARE. At that time, Roseville City Controller Robert Cady said RARE was hoping to break ground this year.

The work will expand gym, fitness, gaming and meeting rooms at the building, as well as add gathering space and a dedicated senior office. It also will involve making necessary structural repairs to the recreation center.

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