VBT Board re-pledges ‘full faith and credit’ to refinance Visteon bond

By Rosemary K. Otzman
Independent Editor
At its Dec. 16 regular meeting, the Van Buren Township Board of Trustees voted unanimously to pledge the township’s full faith and credit to help refinance the 2006 bonds sold by the Local Development Finance Authority to cut interest rates.
The LDFA would save about $1.8 million since the interest rate would go from the present 8% to 3% or thereabouts.
The 2006 bonds are callable this spring and so they can be refinanced.
Although it had not been officially announced, the VBT board members talked about possibly “paying down” the bonds this spring to help reduce bond payments, but that has to be done at the same time the bonds are refinanced.
At a 2 p.m. special meeting on Dec. 15, the LDFA heard a brief explanation from James M. Crowley of Clark Hill law firm. He said the LDFA sold $23 million in bonds in 2003 to help build Visteon Village. The full faith and credit of the township was pledged at that time.
In 2006, a portion of the bonds, $20 million, was refinanced for 10 years and they were callable in April 2015. They also had the full faith and credit of the township behind them.
The $18.5 million in bonds being refunded (refinanced) covers all of the 2006 bonds, he said.
The “full faith and credit” of the township means if the LDFA couldn’t pay its bond payments because its tax payments from the former Visteon property are lower than originally expected, the township would have to pay.
And, paying the bond payments would be required above other township payments. That eventuality is expected to occur in 2016 or 2017. Recently, the township board has been meeting behind closed doors with attorneys figuring out how to handle that problem, but nothing has been publicly announced.
The resolution the LDFA passed gives authority to two people – LDFA Chairman Michael Dotson and VBT Supervisor Linda Combs – to be able to act quickly as individuals or together to approve the sale of the refunded bonds over the next few months to take advantage of a low-interest offer.
“We are taking out the old bonds and reissuing these in its place,” Crowley said of the 2006 bonds.
He said they will be doing a negotiated sale, with no call for bids, and the authorized officers will make the decision.
“This is a refinancing of a refinancing,” said Kari L. Blanchett, financial manager from The PFM Group.
She said the 2003 bonds are non-callable and the 2006 bonds are the only portion they can deal with.
“When we sell the bonds, the savings would be locked in,” Blanchett said. “We just saw a dip down in rates the last two weeks.”
She said the earliest they could sell the bonds is the first week in February.
“We’re a little behind the 8 ball on Visteon and have to let them know,” said LDFA member Doug Peters, referring to those who would be buying the bonds.
“The full faith and credit of the township will help a lot,” Blanchett said.
“The only unknown is Visteon,” said Crowley.
Peters said not to expect Visteon to come in and give them an armload of money.
Blanchett said the reason they need a delegating resolution for authorized officers is because they want to move in quicker to lock in the lower rates and don’t want to have to wait to schedule it around an LDFA board meeting.
“We could lose hundreds of thousands of dollars by waiting,” Blanchett said, noting she has been doing this for 30 years and saw when that happened.
She said if the bond sale offer was drastically different than what they expect, “You’d want to bring it back.”
She said with a preselected underwriter, they got two bids back with similar rates and fees and they made sure they understood the situation with Visteon.
She said underwriters are very busy right now.
She said both bids are under 4% interest: .317 or .318, but doesn’t include the underwriters’ and counsel fees. She said Dickenson Wright had a conflict of interest and Miller Canfield has more experience.
When Carl Johnson asked from the audience if the end date of the bonds would be the same with the 2006 bonds, Blanchett said they would. They would be the same with an adjustment in interest rates for the 2006 bonds.
When the resolution pledging the township’s full faith and credit was discussed at the board’s Dec. 15 work/study session, Trustee Jeff Jahr objected to rushing into this.
Clerk Leon Wright said it was discussed for two or three hours in the recent closed-door session.
“No, it wasn’t,” Trustee Jahr replied. “We discussed different scenarios … We can’t talk publicly, but we’ve got a train coming down the track.”
“I’m in full recognition of a train coming,” Clerk Wright said.
“I don’t think you can do this piecemeal,” Jahr said, referring to the refinancing and the paying down.
“Our whole budget was not based on how much, how much it costs to pay down,” said Trustee Reggie Miller.
“I still don’t like the piecemeal,” said Trustee Phil Hart. “Did we have a response?”
Supervisor Combs said there was no response.
“We need a response and if we don’t get it then you need to reconvene this board and we’ll give you direction,” Trustee Hart said, referring to their confidential, closed-door talks.
“We can’t not refinance the bonds,” Combs said.
“Putting something down is closely related,” said Trustee Miller. “You’ve got to know.”
“The first strategy is that the bonds are recallable,” said Trustee Brenda McClanahan.
“If this board needs to put something down…” Hart began and then ended his comments.
Later in the work/study session, Trustee Miller asked how much Visteon wants and Combs said they asked for $2 million.
“If the board decides to put an amount down, it’s separate … the board can always make that decision,” Wright said.
But Clark Hill attorney Crowley said at the Dec. 16 meeting that the refinancing and any pay down must be made at the same time.
“If you had extra money, or the LDFA did, at the time the refund bonds are issued you can put something down,” Crowley said. “It has to happen all at once.”
He said the new issue would not be callable.
“The township has to pledge the full faith and credit,” said Jahr. “I’m ready to start talking about it at public meetings… We were discussing paying down.”
“We don’t want to lose the opportunity to pay down,” said Trustee Hart.
Crowley said, “We won’t do anything until everything is resolved.”
Hart said it is the board’s decision on how much it wants to pay down. Jahr said it’s the LDFA that has the bond and it won’t come back to the township board for approval.
“I’m not going to do anything with the LDFA that you don’t agree with,” said Combs, one of the authorized officials who will make the decision.
“We need time,” said Hart, “to decide how much money, if any, we want to throw into the mix.”
Jahr said legal counsel said not to comment, but, “There is a train coming down the track and we can’t just sit here smiling…”
Hart warned they just can’t come back at the 11th hour for a buy-down.