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Reed City Council adopts ordinance to issue up to $6 million in junior‑lien bonds for water‑system upgrades
Summary
On Aug. 12, 2024 the Reed City Council adopted Ordinance No. 90‑G authorizing up to $6 million in Water Supply System Junior Lien Revenue Bonds (Series 2024) to fund part of an estimated $9.95 million program of water‑system improvements; the bonds are payable from water‑system net revenues, not city taxes.
The Reed City Council on Aug. 12 adopted Ordinance No. 90‑G to authorize the issuance of Water Supply System Junior Lien Revenue Bonds, Series 2024, in an aggregate principal amount not to exceed $6,000,000 to help pay for improvements to the city’s water supply system.
Council voted unanimously in favor of the ordinance during the regular meeting at Reed City Council Chambers. The measure authorizes sale of the bonds to the Michigan Finance Authority and includes program details and delegations that allow the mayor, city manager and other authorized officers to execute contract documents and a Sale Order setting final terms. The ordinance caps the interest rate at 2 percent per annum and specifies that proceeds may not be used for capitalized interest or a bond reserve account.
The ordinance and attached engineering plans describe a multi‑part project estimated at about $9,950,000 that includes new watermains, replacement and repair of existing watermains, system‑wide water meter replacements, replacement of a water‑supply well, improvements to storage tanks and related restoration and right‑of‑way work. The ordinance states that any remaining project costs will be paid from state appropriations, grants and available system funds.
Under the ordinance the Series 2024 Bonds are junior liens on the water system’s Net Revenues and are subordinate to the city’s Series 2006 senior‑lien bonds; they will rank equally with the Series 2012 junior‑lien bonds. The ordinance contains standard rate‑covenant language requiring the city to set rates to produce Net Revenues at least equal to principal and interest that come due in each fiscal year. The ordinance also authorizes negotiated sale to the Michigan Finance Authority through the Drinking Water State Revolving Fund program administered by the Michigan Department of Environment, Great Lakes and Energy (EGLE).
Council also authorized the appointment of Baker Tilly Municipal Advisors LLC as financial advisor and Varnum LLP as bond counsel for the transaction; the approvals anticipate that some of those fees will be paid from bond proceeds. The sale remains conditioned on customary contract documents, bond counsel opinion and the execution of a Sale Order that will set final maturities and the exact principal amount sold.
Next steps listed in the ordinance and discussed in the meeting include execution of the Purchase Contract and related closing documents with the Michigan Finance Authority, periodic advances of bond proceeds as the project is built, and periodic reporting by the Authority on advances. The ordinance became effective on adoption.
