Site agreement means Wayne County borrowing in the works for new jail

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Wayne County, Michigan will use $50 million of remaining bond proceeds from its unfinished jail project on a new criminal justice center project.

The county, which has been in negotiations over the complex project with the firm Rock Ventures for about a year, said its remaining $380 million share in the overall costs will be funded by a mix of new bonds and general fund revenue. Rock Ventures, the vehicle for Quicken Loans Founder Dan Gilbert’s considerable Detroit real estate ventures, will cover the $153 million remaining cost of the project and any overruns. The total cost of the project is tagged at $533 million.

The county expects to issue bonds for the project this summer.

It had not been clear if the IRS would permit the county to use the unspent portion of the direct-pay, taxable recovery zone economic development bonds the Wayne County Building Authority sold in 2010 to finance the now-abandoned Gratiot Avenue jail project in downtown Detroit.

But county officials now say they have been cleared by the IRS, though not in the form of a private-letter ruling.

“Based upon discussions with the Internal Revenue Service, Wayne County’s bond counsel has advised the administration that the transactions, as structured, will satisfy applicable federal tax requirements,” a spokesperson said.

“The county’s improved financial position will lead to a lower interest rate ultimately saving the Wayne County taxpayers millions of dollars,” County Executive Warren Evans said.

Evans announced the tentative agreement with Rock Ventures at a press conference Wednesday. The final purchase agreement on the land swap deal with the city of Detroit still requires approval of the Wayne County Commission and the Wayne County Land Bank.

“This is a good deal for Wayne County,” Evans said. “It’s been a long road trying to solve the Gratiot jail fiasco. It’s had twists and turns and probably more curve balls than I want to think about.”

The criminal justice center will house the county’s 2,280-bed jail, sheriff and prosecutor staff and administrative offices, criminal courthouse and juvenile detention facility. The center will be completed on property being acquired from Detroit.

In exchange, the county will transfer to Rock the existing Division I and II jails, juvenile detention facility and Frank Murphy Hall of Justice. Upon approval and execution of the deal, these parcels will be leased back to the County for $1.00 per year until the criminal justice center is complete and the County has transitioned to the use of the new facilities.

Rock Ventures will also, in a separate transaction, purchase the property where the unfinished Gratiot jail is located. Evans said specifics of the mixed-use development that will go on the jail site are unclear but the county will have input.

Rock Ventures is expected to begin demolition of the jail site in the summer or fall of this year. The project is expected to be completed by the summer of 2022.

In October, the county and the city of Detroit agreed to a land swap to free up the Gratiot jail. Under the agreement the county would take ownership of a portion of a Detroit Department of Transportation property where the new jail would be built under the proposal being pursued by Gilbert's Rock Ventures. In return, Detroit receives ownership of the 1.4 million-square-foot former American Motors Corp. site on Detroit's west side, which is owned by the county land bank.

The county poured $150 million into the failed jail project at the Gratiot site but cost overruns led to the previous administration to suspend construction in 2013.

The county exited a financial emergency consent agreement with the state in 2016.

It remains at junk rating levels but only one notch below investment grade after a series of upgrades. Moody's Investors Service rates the county's GOs Ba1, Fitch Ratings has the rating at BB-plus and S&P Global Ratings rates it BB-plus.

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