CHICAGO - Michigan's ailing economy could get a lift from two separate bond-funded packages that are likely to be signed into law within the next month.
The Senate as early as today is poised to vote on bills that would authorize creation of a $60 million tourism promotion program to be financed entirely with savings from the refinancing and restructuring of some of the state's outstanding tobacco bonds.
And next week, Gov. Jennifer Granholm is expected to sign into law another package that would allow the state housing authority to issue municipal debt to fund refinancing programs aimed at homeowners who have fallen a few months behind in mortgage payments or those carrying adjustable-rate mortgages.
The tourism promotion effort was first proposed by Granholm as part of her $45 billion fiscal 2009 budget, introduced in February. The three-year, $60 million program would be financed with the savings from refinancing roughly $150 million of the state's outstanding tobacco bonds, as well as converting some of those bonds into tax-exempt debt to lower the cost of borrowing.
The Senate Committee on Commerce and Tourism approved the bills Tuesday, and the full Senate could vote on the package as early as today. The House passed the bills March 18.
"Obviously we're very hopeful that the Senate will take quick action, because it is part of the governor's overall economic stimulus package," said Granholm spokeswoman Liz Boyd. "We can put that money to good use for the summer travel season. Time is of the essence to maximize the investment of those marketing dollars."
Of the $60 million savings, $40 million would come from extending the terms of the outstanding tobacco bonds - most likely by four years - and the remaining $20 million would come from the switch to tax-exempt status from taxable. The conversion is possible because the proceeds would go to projects that qualify for tax-exempt financing under the Internal Revenue Code.
Michigan has sold a total of $1 billion in two separate tobacco bond issues, including $490.6 million of taxable bonds in 2006 and $527 million of tax-exempt bonds in August 2007.
The tourism proposal is part of Granholm's larger budget proposal that relies on refinancing $550 million of the state's outstanding debt to save $160 million.
Meanwhile, Granholm next week is likely to sign into law another package of bills that would allow the Michigan State Housing Development Authority to issue municipal debt to fund residential refinancings, as well as lift the authority's volume cap to $4.2 billion through 2011.
The bills are part of the housing authority's "Save the Dream" program, designed to help those who are carrying variable-rate loans or have missed fewer than three mortgage payments in the last year. The program would refinance adjustable-rate loans into fixed-rate loans and offer low-interest mortgages to homeowners. Currently, the authority is allowed only to issue debt to help first-time homeowners, not those looking to refinance.
Michigan has the fourth-highest foreclosure rate in the country, and nearly 18% of the mortgage delinquencies in the state involved subprime adjustable-rate loans that have had interest rates rise, according to a legislative analysis of the bill. The legislation would also raise the housing authority's outstanding debt cap to $4.2 billion from $3 billion.
Under the legislation, the programs would be funded through a combination of revenue from future single-family mortgage revenue bonds as well as past tax-exempt bond proceeds. The legislation would also allow the authority to create a recapture tax fund, which would be used to reimburse individual borrowers for taxes they have paid.
Meanwhile, the Legislature has also passed a bill that would allow the small city of Iona to issue new debt to help make payments on existing tax increment revenue bonds. The city relied for 60% of its annual tax growth in the downtown district on Meridian Automotive, an auto parts manufacturing company that recently challenged its property tax assessment.
To settle the dispute, Iona lowered its valuation, which reduced the amount of incremental tax growth revenue the authority collects, according to Senate Fiscal analyst David Zin. The legislation allows Iona to refinance its 1997 bonds to push out the maturity by six years, to May 2016.