CHICAGO -- Wayne County, Mich., seeking ways to combat a fiscal crisis, is reportedly asking a local businessman to buy a half-built, bond-financed jail in downtown Detroit as well as a historic building that houses county administrative offices.
County officials told a local television station that they asked Dan Gilbert, the owner of Quicken Loans who already owns a swath of downtown Detroit, to purchase the properties to take them off the county's books.
Gilbert offered $20 million for the jail site last year, but the county rejected it at the time as too low. Officials are now hoping for a new bid that includes the historic Guardian Building, which houses most executive county offices.
The offer comes as County Executive Warren Evans has asked the state of Michigan to step in and declare a financial emergency. Evans said he wants to enter into a consent agreement with the state to broaden the county's powers to deal with labor and other issues.
Hanging a for sale sign on the jail site is the county's latest effort to extradite itself from the failed project which has turned into a major headache for the cash-strapped government.
Wayne broke ground on the $300 million, 2,000-bed project in 2011 and halted it by summer of 2013 amid climbing costs. The county's former chief financial officer and two others connected to the project were indicted by a grand jury in 2014 for misconduct in office and willful neglect of duty tied to the jail financing.
Wayne is paying $14 million in debt service annually for the abandoned project.
Evans has said he doesn't think the county would be able to access the market to raise the money needed to finish the project, and that it needs to remain on hold until he can address the county's more pressing challenges.
The Wayne County Building Authority in 2010 sold $200 million of limited-tax general obligation federally taxable recovery zone economic development bonds to finance the project.
Bond counsel on the original financing, Miller Canfield, wasn't immediately available to comment on how the sale would affect the bonds.
Yields on the debt have jumped in recent trading. Bonds with a 2040 maturity and 10% coupon were yielding 11.4% in trading this week. That's up from 10% on May 1 trading and 7.5% to 8% in January trading, according to the Electronic Municipal Market Access web site.
Bonds with a 2025 maturity and 9.25% coupon were yielding 9.9% in trading this week, up slightly from 9.4% in April trading and 8.7% in early 2011.
The bonds mature in 2015, 2016, 2025 and 2040. Bonds maturing after 2021 have optional redemption starting in December 2020. The bonds are also subject to extraordinary optional redemption due to a tax law change, but not due to any actions of the building authority.
Ratings analysts have said the jail bonds are the the most likely to be subject to cuts or default of all the county's bonds.
Fitch Ratings has warned that the jail debt could be particularly vulnerable to cuts or default because it is not subject to abatement or appropriation and the project is politically controversial.
"Debt service comprises a relatively small share of governmental spending, but Fitch believes the jail debt could be vulnerable given the failure to complete the project," analysts said in a March ratings commentary.
