Berrien County Drain Commissioner Christopher Quattrin is responding after Berrien County Commissioners this week questioned the financing arrangement set up for a drain project in Chikaming and New Buffalo townships.
At a meeting on Thursday, Berrien County Administrator Brian Dissette said the Streed drainage project is being paid for with a private loan that comes with a 5.72% rate. He suggested to county commissioners it be refinanced next year, with the full faith and credit of the county, to get a better rate.
Quattrin tells us that’s not a correct characterization of the loan.
“First of all, the loan is through a commercial bank out of California, Fresno, that specializes in these types of municipal loans,” Quattrin said. “That is not through a private lender. That’s just not correct.”
Quattrin says the rate isn’t 5.7%, either. He says it’s a flexible, competitive rate.
“It can be bonded out in three years if they want to, if the rates do so, or they could go back to the lender and they would then renegotiate the rates. It’s a very, very flexible product.”
Quattrin says the rate was based on the U.S. treasury notes rates, with carrying cost, and adjusted for municipal tax-free rates. He says the loans also included a rate reset every five years. He tells us such terms would not be available with bond financing, and this reduces the county’s exposure to its debt service and rating for future project funding.
The Streed project is being done to relieve flooding issues experienced by nearby residents. Work has already started, and he says it will continue throughout the winter.
Quattrin says some county commissioners have repeatedly mischaracterized things his office has done. His term as drain commissioner will end with the new year.
Below is a press release from Quattrin with an explanation of the project’s financing:
“The Berrien County Drain Commissioner has secured a construction loan for the Streed drainage district project.
The Streed drainage project scope includes stormwater improvements, an upgrade to the water main, and roadway replacement. The project will be constructed over the next three years, starting this month. The work will be performed during the off-season, between Labor Day and September, with stoppage occurring before Memorial Day weekend.
The timeliness of funding this project was critical to starting this year, controlling escalating construction pricing, and keeping the construction schedule as contracted. The low bidder was Kalin Construction, Sodus, Michigan. The bid anticipated keeping Kalin’s crews busy during the
winter months.The loan is designed to fund the project through the construction period and have a flexible refund and refinance element. The rate was based on the US treasury notes rates, with carrying cost, and adjusted for municipal tax-free rates. The loans also included a rate reset every five (5) years. The fixable features of this loan are not available with Bond Financing. This financing avenue has reduced the County of Berrien’s exposure to its debt service and rating for future project funding.
The loan has allowed for prepayment of assessments thus saving those preparers the interest cost. The Drain Commission has currently collected approximately $2.8 Million in prepayments. The construction loan has saved approximately $200 thousand in bond processing fees and about
$1 million in first-year capitalized interest. If the loan is carried to term, an additional approximate $2 million in savings would be gained. In addition, if the project is run effectively, the bid savings and other unused project funds can be refunded, which would provide an additional rebate to the district’s landowners and municipalities.The loan was provided by a commercial bank, FFB, out of Fresno, California, which specializes in municipal funding.”
