Monday, February 9, 2015

"We have now what we have always needed, real partnership with government"

Update: The words "debacle" and "bailout" were used by the Clarion-Ledger and Madison County Journal about in their headlines about the bill.  Parkway South has not defaulted on the TIF bonds.The Galleria TIF has not failed and is producing.  The county is restructuring the bonds so as to match payments with revenue.  The TIF included tax-exempt property, which obviously is self-defeating.   The original post was based upon what was reported in the two newspapers.  More information will be added if it becomes available.   County sources said county officials did not ask for the legislation nor did anyone ask the legislature to draft the bill.  

Original post: It looks like the Madison County Board of Supervisors went running to the legislature for help after yet another one of their deals has problems.  First there was the Parkway East PID that failed.  Now there is Parkway South.  It has problems as well and shazam, someone wants to make it easier for the county to cover the losses from the use of TIF bonds.  TIF bonds are supposed to assist economic development projects by paying for the development with the project's future revenue such as sales and property taxes.  The theory is that the government would get no increase in tax revenue if there was no project.  However, what happens if a project falls short of its projected revenues?  Such a dilemma can create all kinds of problems.  It looks like Senator Tool has teamed up with Trustmark to pass some protection for the  developers and banks at the expense of the taxpayers.  The Clarion-Ledger reported:

State Sen. Joey Fillingane said as the result of a recent “debacle” concerning an economic development project in Madison County, Trustmark Bank has pulled its participation from similar projects in the state.

Fillingane, R-Sumrall, said that’s what prompted him to author Senate Bill 2550, which allows (but does not mandate) cities and counties to use general fund or other taxpayer money to make tax increment financing bond payments when in danger of defaulting.

TIF bonds are a financing option that allows counties and municipalities to borrow money to fund an economic development project based on the taxes the project would generate in the future. The payments are made off taxes from the property itself and adjacent lands, not regular taxpayer money.

In October, Madison County was unable to pay its November bond payment of $90,000 for its Galleria/Parkway South TIF bond. The county made the decision to restructure the payments in order to avoid default.

“Because of that debacle, the bank is protecting itself and saying, ‘We don’t want to get ourselves or our stockholders back into that situation again,’ ” Fillingane said.

Trustmark did not directly answer whether it has made any such decision or whether the Madison County project affected any others in the state.

“Trustmark has a long history of participating in the Tax Increment Financing market in Mississippi. The method of financing is not the issue; it’s the underlying, individual project that determines if Trustmark has an interest,” Barry Harvey, Trustmark’s executive vice president and chief credit officer, said in an emailed statement. “We will continue to look at each Tax Increment Financing transaction on its own merit and participate in the projects we feel are viable.”....

Commercial real estate attorney Ron Farris said Trustmark’s reported decision not to participate in TIF bonds in the state has hurt two major projects in Hattiesburg.

“It has impaired and hurt people in two major projects in Hattiesburg in terms of delay, cost and unmet expectations,” Farris said. “It’s a big threat to the commercial real estate industry in Mississippi.”

Farris was involved in the proposed plan for the Galleria TIF in its early stages.

Fillingane’s bill would also mandate county and city officials be provided separate tax rolls that identify any changes in valuations for properties associated with bonds so as to prevent a property’s valuation and thus its tax revenue from being decreased.

The bill has passed out of the Senate Finance Committee and will be voted on by the Senate.  Rest of article.
Uh-huh.  Translation: The Madison County Board of Supervisors fell for a Bob Montgomery special, the deal blew up, and now they want to be able to bail out everyone involved with your money.  This bill will make it easier to put local governments on the hook for private development projects.  TIF's use future revenues from a property and business associated with that property such as sales taxes.  If the governments are going to backstop these deals as Senator Tool intends with his bill, then TIF bonds should instead be called subsidy or government bonds because that is exactly what they will be.  The relevant part of SB #2550 states:

7)  If the assessed value of property included in a tax increment financing plan is reduced and the debt service on the tax increment bonds issued under the plan cannot be satisfied when due by the revenues payable to the municipality pursuant to the tax increment financing plan, the governing body may elect to pay from the general fund of the municipality the difference between the amount of the revenue payable to the municipality pursuant to the tax increment financing plan and the debt service payment that is due. SB #2550
One can imagine there are quite a few other banks that would love to see this legislation become law.  It would not be a stretch of the imagination to think Balch & Bingham, Butler Snow, and Baker Donelson would like to see it passed as well.   It brings to mind this quote:

What I am saying is, we have now what we have always needed, real partnership with the government. 

It looks like the developers and bankers of Mississippi will finally get Hyman Roth's deal.  The Mississippi Tea Party and Bigger Pie is always raising hell about crony capitalism. This is a bill worth raising hell over: bailing out banks when TIF projects blow up.  The developers get paid, the banks get paid, the bond lawyers got paid,  and the taxpayers get screwed. Period.  Perhaps Senator Tool should add language to the bill that if a local government has to cough up the money to pay off the bonds, it can seize the assets of the developer. Can't have that now can we, no...., not in Mississippi, the most corrupt state in the Union. 

The most corrupt state in the nation should not make it easier for banks, developers, and politicians to take our money and blow it on poorly conceived "economic development" projects.  


Anonymous said...

the Madison county BOS has a history of using taxpayer money to benefit developers and ultimately themselves. Let's not forget Rudy. Sadly the state auditor looks the other way to protect these developers and Rudy. Kingfish, you left off the $5,000,000 taxpayer bailout of Terry Lovelace for Lost Rabbit. New Democrat Tim Johnson is right in the middle of all these scandals.

Anonymous said...

It Takes a Village of Establishment Republicans.

Anonymous said...

It is time for the damn Republicans to stop harping on Obama's failed economic policies. No legislation advances to the floor in the Senate without Reeves' blessing. This is, plain and simple, a BAIL OUT, a Mississippi Senate Republican advocated and sponsored BAIL OUT. Trustmark extorts Mississippi and the Republicans run to kiss their ass. Hell, if the Republicans are going to force the average taxpayer into the position of backstopping Trustmark then why the hell don't we just bring all the TIF financing in-house and fund it out of our own Treasury? Yeah, that makes sense!!! It is all too big to fail and when it does we'll dip into all the taxpayer pockets to make sure all the good ol' boys are made whole. The REPUBLICANS in Mississippi are OUT OF THEIR MINDS.

Anonymous said...

Maybe a litte deeper....didn't Fillinggame replace Farris in Senate?

Farris left H'burg for greener pastures in Jaxon, Joey doing the real estate closings left behind.

Kingfish said...

What was told to the committee was that Trustmark quit funding TIF's because of Madison County and it was affecting other projects throughout the state.

Anonymous said...

It should be abundantly clear to regular readers of this blog that if the Tea Party opposes something then it must be a wonderful matter how much money the cronyism will costs us.

Anonymous said...

A top banking executive once told a good friend of mine, "Never, ever, underestimate the greed of a bank."

Anonymous said...

Yes, the current State Auditor turns a blind eye. But there is another candidate for State Auditor (just qualified) who knows where the bodies are buried in Madison County and has no desire to use the office as a stepping stone. I never thought I'd vote for her, but I sure will now.

Body Bags For Sale said...

What good does 'knowing where the bodies are buried' do in the race for State Auditor.

And don't forget that Queen Mary was J. Bell Bagboy's chief and foremost advocate and supporter when he initially ran for the position of "Rudy's Puppet". Had it not been for her, John Bell would never have gotten elected.

So, in that regard, she may know where some bodies are buried, but her shovel was used during the service.

Anonymous said...

The Madison County BOS is now trying to get a DA that is elected from Madison County only. They want one they can control. Michael Guest has been making them uncomfortable recently.

Anonymous said...

What a majority of commenters here fail to understand is that making stupid financial decisions is not illegal. No state auditor can tell a county what they should and shouldn't spend money on. All they can do is make sure the statutory process was followed.

All the comments regarding Rudy- the statutory process was followed. There was nothing illegal about his business dealings with the county.

Is it a smart financial decision to pay him so much for studies and engineering work that may or may not be necessary? Probably not. But as long as he actually performed the work he was contracted to do, there's absolutely nothing any state auditor could do about it.

But those decisions are for the board of supervisors to make. Not state auditor.

Anonymous said...

We all know who in the Senate makes part of his claim to fame the time he spent as an Investment Officer for Trustmark.

Anonymous said...

Based on the facts - those pesky little things that sometimes get overlooked when stuff gets leaked - this was not a bill driven by Trustmark or by Madison County. Based on that, looks like it was some Hattiesburg developer with a project that wasn't 'bankable' and was hoping that this change would make it work. Local politics - either/both Ferris and Fillingame -seem to be the real drivers here.

Anonymous said...

How do you know Trustmark didn't ask for the legislation?

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