During the Tuesday, October 21st City Council Meeting, the City’s distinguished bond counsel, William Danhof of Miller Canfield, provided a “primer” on the concept of bond issuance. As you may know, the City has published its Intent to Bond to fund the public components of City Center II. Despite efforts to the contrary, significant misinformation has been disseminated regarding the liability of East Lansing taxpayers relative to the bond issue. Mr. Danhff very succinctly set the record straight. First, he stated that “this bond issue has been structured as self-supporting debt and is never intended to be paid from the General Fund.” The fact is that the obligation on the City Center II bond issue will be met through Tax Increment Financing revenues on the development itself, along with parking revenues.

The misinformation regarding taxpayer exposure seems to lie in a single requirement that the City pledge “its full faith and credit” as “collateral” if you will. It cannot be emphasized strongly enough that this is standard operating procedure! The City is not proposing to do anything out of the ordinary and in fact we have gone out to bond on 18 previous occasions for a total of $55 million. By pledging the full faith and credit of the City we are meeting a standard requirement of the market. The City’s willingness to pledge its full faith and credit is an indicator that we have done our due diligence and that the bonds will indeed be self-supporting.

Furthermore, the City of East Lansing has worked very hard to earn its outstanding AA+ bond rating and quite simply, if the bonds we have out were not self-supporting, then the City could not maintain this credit rating. An inability to maintain our high bond rating would result in less available credit and higher interest rates for borrowing – just like if you or I defaulted on a credit card payment. So please be clear that neither the City Council nor City administration would undertake a bond issue that could jeopardize our credit rating and expose taxpayers to liability.

When asked by Mayor Loomis if pledging the “full faith and credit” of the City is anything out of the ordinary, Mr. Danhof stated that “This is the way cities do business and fund public infrastructure.” As stated above, East Lansing has exercised this prerogative to fund improvements to the Library, Parks and Hannah Community Center just to name a few. The bottom line is that the ability to issue bonds is provided for by law and is a critical tool for development.

To view the video of Mr. Danhof’s presentation, along with his credentials, please click on the links below.