How the PLA is Funded
City Utility User Tax
The legislation that created the Authority allocated $12.5 million annually from the City of Detroit’s Utility Tax to pay off bonds that are issued to finance the installation of new street lights. This funding source was originally levied to pay for public safety activities. It was chosen because public lighting is clearly an important part of ensuring public safety and because the marketability of the bonds required a secured revenue stream. The law also allocated a portion of the city income tax to public safety to ensure that funding for the police department remains whole.
Amidst the City of Detroit’s bankruptcy filing, a ruling issued in December 2013 by U.S. Bankruptcy Judge Stephen Rhodes declared that the PLA is a separate municipal corporation from the City of Detroit and was not affected by the bankruptcy proceedings. Judge Rhodes assured that all financing secured by the PLA would not be affected by the City of Detroit’s bankruptcy proceedings.
The PLA worked with the the Michigan Finance Authority, the State Treasurer’s office, and the Governor’s office to secure the financing.
Historic Bond Sale
In June 2014, the Michigan Finance Authority sold $185 million in bonds on behalf of the Public Lighting Authority to complete the funding necessary to relight the streets of Detroit.
The permanent long-term, fixed-rate financing refunded $60 million interim financing sold in December 2013, and provided the additional funds for the completion of the street lighting project. The issuance received strong investment grade ratings of “A-” from Standard and Poor’s and BBB+ from Fitch. Both agencies highlighted the legal and statutory strength of the transaction.
Robust Investor Demand
The transaction was two and a half times oversubscribed, allowing yields to be lowered during the pricing process. Thirty-five separate institutions and several dozen individual retail accounts placed orders for the bonds, resulting in an all-in interest cost of 4.53 percent for the 30 year transaction.
This favorable interest rate resulted in the sale of $25 million more worth of bonds than was previously expected, providing the necessary fund for 10,000 additional street lights. The total $185 million sale ensured that 65,000 street lights will be installed across the city.
Independent Auditor Verified Statements
To ensure transparency, accountability, identify opportunities to streamline, and improve operations and promote industry best practices, these statements are pursuant to the audit performed by George Johnson & Company, a certified public accounting firm.
- The PLA’s FY 2016-2017 Audit
- The PLA’s FY 2015-2016 Audit
- The PLA’s FY 2014-2015 Audit
- The PLA’s FY 2013-2014 Audit
- The PLA’s FY 2016-2017 Annual Budget
- The PLA’s FY 2015-2016 Amended Budget
- The PLA’s FY 2015-2016 Annual Budget
- The PLA’s FY 2014-2015 Annual Budget
In June 2014, Standard & Poor’s rated the bonds issued on behalf of the Public Lighting Authority with an A- rating. In this CreditMatters TV segment, Senior Director Jane Ridley describes the bond issue and what was behind the rating: