Monday, March 22, 2010

Pearl bonds update








Pearl Mayor Brad Rogers got hit with a nasty surprise Friday morning. Fitch published a notice that went out to all the wire services (including the Mississippi Business Journal):
"Fitch Ratings-New York-17 March 2010: As part of its continuous surveillance efforts, Fitch Ratings withdraws its 'BBB-' rating on the city of Pearl, Mississippi's (the city) $1.355 million in outstanding tax increment limited obligation refunding and improvement bonds (Airport Metroplex Project), series 2002 due to lack of ongoing disclosure to Fitch.

Fitch will no longer provide rating coverage on the city or the outstanding bonds."

Ouch. This is huge for Pearl as Pearl, like every other municipality, uses bonds to finance construction, roads, water & sewer services, and schools. Bonds are the mother's milk for city governments as they can not function without them. Therefore its a big deal when a major ratings agency like Fitch says it won't provide ratings coverage any longer for Pearl.

Such a notice was puzzling because Pearl has its financial house in order by all accounts. I spoke to the Mayor and unfortunately for him, my phone call was the first thing he had ever heard about any of this. Needless to say, he was shocked and informed me their finances were in good shape. He called me two hours later and said he had "been on a mission" since our last conversation and been "round and round" with Fitch. The TIF bonds are apparently paid by the developer.

A quick check with the website of the Municipal Securities Rulemaking Board shows the bonds were issued in 2002 (see schedule posted above) by Pearl. Bond statement The bond package was originallly issued in 2002 for $2,250,000 to finance improvements (page 6) in the Airport Multiplex project and were TIF's. The introductory statement states "The series 2002 Bonds will be issued by the City...."

Business Wire reported in 2002:
"The bonds are secured by incremental sales and property tax receipts derived from the city's Airport Metroplex tax increment district (the district). Proceeds will refund the city's outstanding tax increment limited obligation bonds (Airport Metroplex Project) series 1998-1 and series 1999, as well as finance basic infrastructure improvements for Phase II of the Airport Metroplex Project.

The 'BBB-' rating reflects the district's satisfactory debt service coverage levels provided by an established increment, steady increases to its incremental tax base since the district's creation in 1997, and a concentrated tax base, which is dependent on economically sensitive sales taxes. The district's proximity to the Jackson International Airport and major highway and interstate systems enhances its growth prospects. The district is expected to continue its improvement as it attracts further commercial development due to its low taxes and prime market location....

The district is located off of US Highway 80, which is a major east-west highway connecting the city to Jackson and Jackson International Airport. Created in 1997 by the city council, the district encompasses 123 acres and is zoned for commercial and light industrial uses. Phase I of the development covers 58 acres and is nearly complete. Phase II of the project began earlier this year as the developer commenced site preparation work on the district's 65 remaining acres. Full development of the district is scheduled for 2005. The district's favorable access to the regional transportation network and proximity to Jackson International Airport attracts a variety of regional tenants including Patterson Dental Supply, Susquehana Communications (Suscom), Hooper's Electronics and MacPapers, Inc." Article

The Mississippi Business Journal updated its story Friday afternoon after speaking to the Mayor:
"Pearl Mayor Brad Rogers said he expects Fitch Ratings to soon issue a correction to the news today that the company is downgrading the city’s credit rating.
Rogers said “The city of Pearl is in strongest financial position it’s been in in a long time. There are no problems...

“Our bond council and our legal council are in contact with Fitch to try to see what information they may be needing that they don’t have. We need to know what they need, and we’ll be happy to provide it for them,” Rogers said.

The Airport project, which is financed by tax increment financing (TIF) bonds, is producing more than enough money to pay for itself, Rogers said." Article

This is a big deal because as I stated earlier, cities need bonds to operate. The Fitch notice hit all the wires Friday morning. I spoke to a local trader of muni bonds and he already knew about it from the same wires. The longer such a notice sits out there without being well, noticed, the more harm is done to the City of Pearl. I spoke to Kevin Dolan at Fitch, who was mentioned in the notice. He said Pearl did issue the bonds and they had not been able to get any information from Pearl before the notice was issued (Very nice guy, turns out his dad lived in Madison for a few years so he was actually familiar with the area even though he now lives in NYC. Someone needs to get him an invite to the Mississippi picnic this summer.).

I was not able to find a "district" but I did find a Airport Multiplex LLC on the Secretary of State's website. It listed a Coleman Hammons and Janice Champlin as the members. Coleman Hammons owns Coleman Hammons Construction in Brandon. It is unknown what the relationship between the LLC, the bond package, and the "district" is at this time.

Be that as it may, I've spoken to the Mayor several times and think this will be corrected this week. Mr. Rogers has been pretty aggressive in fixing this problem and trying to set the record straight as he is doing what he should be doing: looking out for his city's best interests.

8 comments:

Anonymous said...

Yawn.

Anonymous said...

Small bond issue, not news.

Ironghost said...

That's still a sucky way to wake up.

MsPearl said...

NOT NEWS??? You're kidding right? I guess if it doesn't have to do with Mayor Mary of Madison it just doesn't matter right? W-R-O-N-G

Anonymous said...

Glad to hear that Mayor Rogers is being very proactive in getting this corrected.

Thanks for posting this, KF. Though I live in Rankin Co.,it's unlikely I would have seen it otherwise.

As far as not being news, I have to agree with you, 1:47. Does Madison and NE Jxn always have to be the topic? The rest of the metro area keeps spinning too. What if your town/city lost rating coverage on bonds? That dries alot of stuff up. It's kinda a Big Deal. I know people think, NO, it would never happen to our town, well, neither did Pearl.

Kingfish said...

Its big news when your bond costs went up with other ratings agencies or it gave a negative impression to the financial community when you tried to obtain funds for future projects. This is like the infrastructure issue in Jackson: its boring and everyone ignores it until it quits or is really needed.

I felt sorry for the poor Mayor, did not know this was out there and it wouldn't surprise me if he was sandbagged by a holdover employee or if someone quit at the change of administration and didn't tell anyone anything (That did happen during Melton's term).

Anonymous said...

The only people who've been ignoring Jackson's infrastructure issues Kingfish are the various mayors and council people of the past few decades. The citizens who have to put up with our shitty roads, broken water pipes and sewage seeping out of the ground have been asking for the problems to be fixed for a long time.

Anonymous said...

KF, Did Mayor Rogers get the Fitch error Corrected? It is 2015.

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