I've joked before that the U.S. Government should sell debt bonds to reduce the debt. It would make a good Onion headline. However, a bond insurance company is alleging that is exactly what the Madison County Board of Supervisors did in diverting $1 million in bond proceeds to repay the bonds for the Parkway East PID according to a lawsuit filed in U.S. District Court on November 1.
The Madison County Board of Supervisors created the Parkway East Public Improvement District for the Galleria Parkway in Madison. Parkway East sold bonds for $27.7 million in 2005 to finance construction of the project. Parkway East would repay the bonds through assessments levied on members of the district. Madison County signed a contribution agreement with Parkway East that stated the county would repay the bonds for two years if the district was unable to do so:
The contribution agreement provides that in the event the District fails, for any reason, to levy and/or collect (or have collected) a sufficient amount of Special Assessments from the owners of land within the district in order to satisfy any debt service payment, the county shall advance to the trustee the outstanding amount required to satisfy the deficient debt service payment. (P.21 of the Issuing statement.)
The district informed Madison County it would be unable to repay the bonds in 2011 and the county repaid the bonds for two years. The county recently informed the trustee and bond insurance company it had fulfilled the terms of the contribution agreement and would no longer repay the bonds as repayment was now the responsibility of Parkway East.
Radian Asset Assurance was none too pleased about the prospect of eating the payments for millions of dollars in defaulted bonds so it investigated and filed a complaint alleging the county misspent bond proceeds (similar to the Secretary of State action against David Watkins) after it received a letter stating Madison County would not make the November 2013 interest payment. Radian asked the court to order Madison County to keep repaying the bonds and took the position the two-year limit was invalid. Thus Madison County would have to repay the bonds as long as Parkway East was unable to do so. Radian claims (p.4, #18) the annual debt service is $1.95 million. The bonds will mature in 2030.
Madison County sold "completion bonds" in 2008 to finish the project, as there was insufficient money remaining from the 2005 issue to do so. The total amount of the bonds sold was $3 million. The proceeds were used to finish the project but not all of the proceeds were used. Radian accuses the county of violating the terms of the 2008 bonds, as they stated the county would use the funds only for the construction of the project:
The bonds are being issued for the purpose of providing funds to complete the financing of a portion of the costs of the construction project, as defined in the master indenture..
Bankfirst holds the 2008 bonds. Radian alleged:
In light of the political pressure and criticism, the County, through its board of Supervisors, decided not to make payments required by the contribution agreement. Instead of complying with its obligations under the contribution agreement to make the required contribution payments, the county and the district used proceeds from the issuance and sale of completion bonds to pay debt service on the 2005 bonds and the 2008 bonds.
Radian states the final payment for the actual construction of the project was made in February 2009. It argues:
the county and district approved the use of excess 2008 construction funds after construction was complete to pay debt service of approximately $1,000,000 on the 2005 and 2008 bonds.It states the following payments were made in violation of the indentures (#57-60):
$117,385 on May 10, 2009 for 2005 bonds.
$205,430 on May 1, 2009 for 2008 bonds
$423,146 on November 1, 2010 for 2005 bonds
$56,017 on November 1, 210 for 2008 bonds
$153,604 on May 1, 2011 for 2005 bonds
$32,864 on May 1, 2011 for 2008 bonds.
The complaint doesn't stop with the alleged misspending of the 2008 bonds. Radian also describes a land transaction in 2011. Landspan LLC owned 219 acres in the district. It lost the property to the state for failure to pay taxes. Charles E. Clark and David Clark are listed as members of the LLC. Don McGraw (of Bob Montgomery's law firm) was listed as the registered agent. Montgomery McGraw established Parkway East and handled all legal matters for the PID.
The county swapped the land in exchange for making the $374,021 October 2011 for the PID. The board approved the transaction. Radian alleged the special assessments on the property remain unpaid. Even worse, it claims the district's 2014 budget report states the property should generate $536,842 in special assessments in 2013 (#72).
Radian accuses the county of "refusing to pay the special assessments" on the property, stating the Mississippi Code exempts the county from doing so (Section 27-31-1(b)). Radian claims the transfer "deprived" the district of $1 million in special assessments over the last two years. The county has "failed to market" or "list" the sale of the property.
Radian claims the debt service reserve fund will run out of money by May 2015 unless the contribution agreement is enforced. Radian states the fund currently had a balance of $1.8 million in September and the anticipated November 2013 interest payment is $501,788.
Radian argues "there has been a payment default with respect to the 2008 bonds, as there were insufficient funds available to make the regularly scheduled principal and interest payments on May 1 and November 1, 2012."
Parkway East is accused of being unwilling to collect the special assessments or recalculate them. Radian stated the bonds are in "default."
Editorial comment: I don't see how Radian gets around the two year limit as the agreement clearly spells it out. The alleged diversion is probably the real angle to watch.
Copy of contribution agreement
15 comments:
I'm probably high, but I think I remember in one of your older stories on this, KF, a listing of the landowners of the PID. All of this bond mess aside, the first question should be who owns the land and isn't paying the fees that are due. These folks are skirting their responsibilities and forcing the county to pay. I did a search and couldn't find the listing of landowners in the comments.
Isn't Bob Montgomery one of the landowners? Shit my memory sucks.
Maybe a dumb question on my part, and if it is, I apologize, but is Parkway East the same thing as Galleria Parkway? This posting just reminds me of an article I saw a few days ago about the BOS requesting funds for a widening project for Galleria Parkway. I'm just wondering why they already need to pursue money to widen the parkway? As I drive on it every day, the width isn't the problem, it is the crappy construction that is the issue that needs to be addressed. They already had to fix some dips in it where the freaking thing was about to cave in. Seems to be a common theme with our newer roads in Madison County.
http://onlinemadison.com/Main.asp?SectionID=1&SubSectionID=1&ArticleID=27460
10/16/2013 6:00:00 PM
Supes seek $8.8M for two roads
Madison County supervisors held a special meeting on Monday to submit their request for $8.8 million to fund two widening projects, Bozeman Road and Galleria Parkway.
The funding stems from the federal Surface Transportation Program. The Jackson Metropolitan Planning Organization (MPO) has $22.3 million available for Hinds, Rankin and Madison counties to use for road improvements from the federal government.
The funding may be used for capacity deficient projects, traffic operational improvements, pavement management projects and small municipalities.
According to District 2 Supervisor Ronny Lott, who also serves on the MPO Executive Committee, a grading system is set in place to determine which roads are in greater need of assistance.
Lott said the board chose both Bozeman Road and Galleria Parkway due to their high scoring potential.
"We're going to be fighting with all the other areas here in central Mississippi for that money.
"You're looking at Hinds, they're always a powerhouse. The sooner you get it in the better. The higher the rating the better, but it's all on the vote of the board."
Applications were due Wednesday so that was the reason for the special-called meeting.
Kingfish is the best damn investigative reporter in the metro area. Bar NONE!M
On the Madison County Tax Assessor its only four deeds under "galleria". The name Richard A. Ambrosino is central in the companies, if anyone knows of him. Calvin Well's firm set up the "S.I.D. Corp" and the "PSC Corp" in 1988. The legal description for the 2nd transaction is the lengthiest I have ever seen.
Owner's name Parcel number Legal description More
GALLERIA PARKWAY LLC 072C-06A-005/00.00 15.5 AC OFF E/S NE1/4 More
GALLERIA PKWY LLC 082I-31-002/01.00 24.4 AC IN SE1/4 E OF HWY & S OF CR More
GALLERIA PKWY LLC 072C-06A-003/01.00 2.8 AC IN S1/2 N1/2 NE1/4 & IN N1/2 More
GALLERIA PKWY LLC 072C-06A-003/02.00 4.5 AC IN S1/2 NE1/4 More
Please tell me that bagboy might go to jail.
@8:36 - I was not at the meeting and have zero inside information, but the widening might have something to do with the potential Target development on the west side of Galleria Parkway.
Of course, if true, some/all of the cost of the roadway work should be borne by the developer like what is done in the rest of the world.
I know ambrosino. good at crummy buildings, owns the uglies house in the county, opposite then entrance to reunion. I actually heard him tell someone it was his copy of a natchez antebellum he drew on a napkin....
Are these the PID bonds that show as GO bonds some places? This seems familiar that way, don't have time to check, but there are some MS PID bonds that appear that way some places.
This could be one of the reasons businesses flock to Madison. They're giving away everything!
City of Madison architecture has a certain appeal, but the more of it you see the more mundane it becomes. Why must a coffee shoppe have an extra large portico?
The only attractive structure is the Washington Monument cell tower.
Dear 1:52
Stand by for a shock. The monument is in Ridgeland. You must have your britches on fire.
Speaking of the Washington Monument, Ridgeland probably has one of the highest priced hourly motels with the Hyatt next to Butler Snow!
You would think that the bond holders would at least get to have all the land right? That the land secured the debt would at least allow for some measure of justice....but
Since the assessments were not paid the land is stricken (or struck) to the State...such that the bonds issued are now entirely worthless....the state cannot be required to pay assessments...
The land, without being saddled by bonds/assessments will be sold for literally pennies on the dollar....for the next 30 years....
Bond holders eat this...bond insurers fight with the county...but lose most likely....
Richard Ambrisino will hang out and wait and buy buy buy...
What a circus
Maybe Fitch got some notice in regard to the bonds in Madison County becoming worthless and attached the State of Mississippi's financial condition.
Yes, I know it was not a downgrade, but something all debt buyers get.
Who gives a shit what a motel room costs in Ridgeland or Madison? It's cheaper than a funeral. Axe the lady from Texas who buried her bass-fisherman huband two weeks ago. And none of them rent by the hour. You're an idiot 4:23.
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