On March 9, 2018 the News Advocate published the following: [here is the full document as a 8 mb PDF]
It was noted that the closing sections were not signed and the sections to be completed by Roger Swets, appointed Bond Counsel of Dickinson Wright, were empty.
On May 15, 2018 the closing meeting was held for the Village to enter into a loan/grant agreement with the federal government, USDA Rural Development to accept the liability for debt repayment.
The following has no explanation:
May 16, 2018 Approve Minutes:
• Motion to change the motion from May 14, 2018 Special Meeting for signature on
the Water closing documents by Ronning seconded by McPherson, motion carried.
Aye: Bass, Evans, McPherson, Ronning, Ware, Bair
• Motion to change the motion from Monday 14, 2018 special meeting, for signature
on construction contracts on behalf of the village by Evans seconded by McPherson,
Aye: Bass, Evans, McPherson, Ronning, Ware, Bair
Since that date, numerous requests for information to both USDA and the Village of Bear Lake by local residents and tax payers have gone unanswered. A FOIA request was sent to the Village on July 21, 2018.
It sought confirmation of the terms set out in a Letter of Commitment from USDA dated March 11, 2016. It would be assumed an updated LOC was sent in 2017 or 2018?
[“March 11, 2016
Jeff Bair, President
Village of Bear Lake
PO Box 175
Bear Lake, MI 49614
SUBJECT: Water Project
Loan $ 1,463,000 (Section 6025); 1.875% Poverty Interest Rate; 40 Years
Grant$ 2,000,000 (Section 6025); $547,000 (Regular Funds)
Dear Mr. Bair:
This letter establishes conditions which must be understood and agreed to by you before further consideration may be given to your application. The loan and/or grant will be administered on behalf of the Rural Utilities Service (RUS) by the State and Area staff of USDA, Rural Development. Any changes in project cost, source of funds, scope of services or any other significant changes in the project or applicant, must be reported to an approved by USDA, Rural Development, by written amendment to this letter. If significant
changes are made without obtaining such approval, Rural Development may discontinue processing of the application.
This letter does not constitute loan and/or grant approval, nor does it ensure that funds are or will be available for the project.
The interest rate will be the lower of the rate in effect at the time of loan approval or the time of loan closing. The loan will be considered approved on the date a signed copy of Form RD 1940-1, “Request for Obligation of Funds”, is mailed to you.
Project Funds – Project funding is planned from the following sources:
Rural Development Loan/Grant $1,463000/$2,000,000 grant/$547,000 grant
Village of Bear Lake $10,000
Any changes in funding sources following obligation of RUS funds must be reported to the processing official. Prior to advertisement for construction bids, you must provide evidence of applicant contributions and approval of other funding sources. This evidence should include a copy of the commitment letter.
Disbursement of Funds –Any applicant contribution will be considered as the first funds expended. An agreement should be reached with all other funding sources on how funds are to be disbursed before the start of construction. RUS loan funds will be used prior to the use of RUS grant funds.
You must establish a separate construction account, with an acceptable financial institution or depository that meets the requirements of 31 CFR Part 202. All project funds will be deposited into this account.
Financial institutions or depositaries accepting deposits of public funds and providing other financial agency services to the Federal Government are required to pledge adequate, acceptable securities as collateral. All funds in the account will be secured by a collateral pledge equaling at least 100% of the highest amount of funds expected to be deposited in the constructions account at any one time. Additional guidance on collateral acceptability and valuation are available at Treasury’s Bureau of the public debt website at
Any Agency grant funds not disbursed immediately upon receipt must be deposited in an interest bearing account
Loan Repayment – Your loan will be scheduled for repayment over a period of 40 years at the interest rate of 1.875%. The first interest payment will be scheduled no later than six months from the bond closing date.
The interest during construction will not be capitalized. Principal repayment will not be deferred. The interest rate will be the lower of the rate in effect at the time of loan approval or the time of loan closing, whichever is less, unless you choose otherwise.
You will be required to complete RD-3550-28, “Authorization Agreement for Preauthorized Payments” for all new and existing indebtedness to the Agency. Your loan payment will be electronically debited from your designated bank account on the day your payment is due.
Reserves – Reserves must be properly budgeted to maintain the financial viability and sustainability of any operation. Reserves are important to fund unanticipated emergency maintenance and repairs, and assist with debt service thru a debt service reserve should the need arise. Reserves can also be established and maintained for the anticipated and expected expenses including but not limited to operation and maintenance and customer deposits.
The annual bond reserve requirement is determined to be $5,300. This will accumulate at the rate of one- tenth of one annual payment per year until the balance is equal to $53,000.
The annual Repair, Replacement and Improvement (RRI) reserve requirement is determined to be $12,133. When the Bond Reserve Fund is fully funded the entire $17,133 annual requirement must be deposited in the RRI Fund for the life of the loan.
Acting Area Director USDA, Rural Development
cc: Community Programs S/O
In 2016 the following schedule of payments was supplied under a prior FOIA. The question has been asked but not answered – does this still apply in 2018?
The total to be paid in interest = $630,302 [see excel Spreadsheet here] Making the total directly paid by Village residents $2,093,302 in addition to the $ 2,547,000 partially paid from the federal tax dollars.
Here is the response on July 24, 2018. No additional response has been received:
“1. The amended publication of the Resolution to Authorize Issuance of Water Supply System Revenue Bonds to include the Bond sale section left vacant previously.[items are quoted from the March 9, 2018 published item]
EXHIBIT A was not completed as the document was published prior to the Bond Sale – where is that information please?
“August 8, 2018
To: Village of Bear Lake Clerk Cindy McPherson
When does the Village of Bear Lake intend to supply or publish this information and amend the FY2018-19 Operating Budget?”
The lack of response is troubling, as is the lack of information on the water project itself.
Village residents question how the loan and reserve requirements, in addition to a proposed new DPW Building loan can be met from the current water bill income?