By SUE SUCHYTA
Sunday Times Newspapers
ALLEN PARK – The city is $1.3 million behind in collecting revenue to make payments on bonds for the Allen Park Studio Center.
The shortfall appears in the city’s revenue and expenditure report for the month that ended Nov. 30. The Downriver Sunday Times obtained a copy of the report Dec. 29; it shows the city paid over $1 million in bond interest for its fiscal year-to-date as of Nov. 30 for its 104-acre studio development along Southfield Road.
Despite the numbers in the report, Finance Director Timothy McCurley said the city has remained current on bond interest payments, as well as all of its other financial obligations.
“(We’ve) never missed one, don’t plan on it, and we will make all of our payments,” he said.
The city issued $2.725 million in tax-exempt infrastructure financing bonds, and officials had planned to pay it back based on projections of tenants paying nearly $2.5 million a year in lease payments at the site.
It also obtained another $28.275 million in general obligation bonds for the complex. The terms of all of the bonds extend until 2039, with the city liable for up to $67 million in principal and interest if the bonds reach maturity.
The initial projections, which were not based on a legally binding long-term lease agreement, called for the biggest portion of the payments on the infrastructure bonds — just over $1 million per year for 28 years — to be paid by Roush Enterprises Inc., which occupies 224,275 square feet of the complex.
Unity Studios and the Lifton Institute for Media Skills were anticipated to provide $150,000 in lease revenue in the fiscal year ending June 30, 2010. The two companies left for Detroit on Sept. 30 after a year in the complex.
Revenue from both of those entities was estimated at $300,000 for the fiscal year ending June 30, 2011, before attaining a $380,000 yearly level for each remaining fiscal year through 2039.
The city’s anticipated lease revenue also was based on Stautzenberger paying $123,000 a year and Asia Forging Supply Co. $169,000 per year, both through fiscal 2039. Asia left the complex in late summer after its lease expired.
Collection of lease payments fell far short of initial projections, according to the report obtained by the Downriver Sunday Times.
The combined annual lease revenue from all of those entities were estimated by city officials at $1.68 million, which then was to be used to cover city debt obligations for each fiscal year, the report said. Officials had said that other anticipated leases totaling $810,000 per year were expected to bring the city’s anticipated revenue to pay off the debt to $2.49 million annually.
Bond rating agency Standard & Poor’s noted in its June 10, 2010, credit profile of the city that most of the leases were expected to be short-term, two-year leases with entertainment production companies, not long-term leases through 2039, the time period of the 2009 capital improvement bonds. The agency also lowered the city’s credit rating on the bonds, meaning the city will have to pay more in interest.
In the recent report, REDICO, the former managing agency of the studio complex, said that Unity and the Lifton Institute made only $68,000 in lease payments before vacating their leases. REDICO said Unity made two lease payments: $43,000 in April 2010 and $25,000 in May 2010.
Absent the revenue from the leases, it is unclear where city officials will get the money to make the bond payments. City Administrator Eric Waidelich has said the payments will not come from the general fund. He, Economic Development Director Michael Donofrio and Building Official/Electrical Inspector David Boomer are working to find potential buyers or tenants for some properties within the complex, Finance Director Timothy McCurley said.
“We are working on that,” McCurley said. “The next payment is due in May, and they’re working on those issues right now.
“We’re working forward trying to make this all work, because it benefits all — everybody — if it works. We need it to work. Because if we don’t, everybody fails.”
City officials will hold a town hall meeting from 7 to 9 p.m. Feb. 1 to answer residents’ questions about the state of the studio complex.
The City Clerk’s Office will provide a disk of relevant complex documents for resident review upon request and for a fee.