Pearl Mayor Brad Rogers reacted very strongly to a Bloomberg story that claimed bond deals for Trustmark Park and the Basspro store were wrecking city finances. Pearl sold $78 million in revenue bonds to pay for the projects. However, those payments are causing problems for Pearl with ratings agencies such as Moody's.
Mayor Rogers told JJ that Pearl agreed to contribute $800,000 a year for ten years towards the repayment of the bonds. However, then-Mayor Foster and his crew back-loaded the deal. The city has to pay $950,000 per year for the next ten years. Its obligation ends after twenty years. He said the city is allowed to charge a $1 per ticket tax to Braves games. He said a 2% tourism sales tax on was implemented several years ago to help cover the shortfall.
However, Moody's downgraded $12.46 million of Pearl's general obligation tax bonds from Aa3 to Ba1. Consider the rating to be a credit score for cities. The city enjoys lower interest rates and higher capacity to borrow if the rating is high. Aa3 is considered to be a very strong rating of a city's creditworthiness. Unfortunately for Pearl, a Ba1 rating is considered to be below-average creditworthiness (See Municipalbonds.com for a better explanation of the ratings system.)
The report stated:
*Moody's downgraded Pearl's general obligation tax bonds. It affects $12.46 million of debt. The rating was placed under review for further downgrade.
*The general fund position is deteriorating due to the use of the general fund to support "other funds". FY 2014 yielded a deficit that was -6.7% of revenue (p.1)
*The city has potential exposure due to "contingent liabilities stemming from various dept financings used to construct a stadium in 2004."
*One reason the city is losing money is due to the higher rates charged by the city of Jackson for wastewater treatment. The city began charging the West Rankin Utility Authority a higher rate but Pearl did not pass the increase on to customers and ate the difference. (p.2)
*The city budgeted for a general fund deficit of $1 million in 2015 (p.2). The report states that the general fund cash account had a balance of -$2.7 million (see p.11 in audit posted below).
*Moody's considered the PERS obligation as well. The problem for Pearl is it is apparently one of the first cities to suffer under the new GASB rules. GASB is going to inflict a great deal of pain on many cities and counties. Time to make a little detour into GASB because most readers will have no clue what GASB is. Pensions & Investments reported in January:
The pressure will result from the new Governmental Accounting Standards Board standard 68 that requires employers participating in those plans to report in their balance sheets their share of a state's net pension liabilities.... Rest of article.Translation: New accounting rules mean cities will have to carry on their books an increased recognition of their pension liabilities even if covered by a state employees retirement system such as PERS. It may not be fair but as far as Moody's and other ratings agencies are concerned, a liability is a liability.
Mayor Rogers said Pearl was suffering from several projects that cost the city millions of dollars and did not provide revenue. He said the only money the city gets from Braves games was the $1 per ticket surcharge and the sales tax at the actual restaurant. The developer is responsible for the "stadium" bonds but Pearl agreed to make annual payments in the amounts stated above. Concessions, luxury seats, and souvenir revenue all go to the Braves organization. Mayor Rogers said the city does not get sales tax revenue from ancillary developments such as Basspro and Sam's Wholesale Club. The Outlets of Mississippi provide no sales tax revenue as well. He said MDA negotiated the deal and then brought it to the city as a "take it or leave it" prospect. However, the Mayor said the city will begin to receive sales tax revenue from the mall in two to three years when the five-year sales tax exemption ends.
Mayor Rogers also said his predecessor began five major road projects that were funded by bonds. The city is still paying the bonds for those projects.
Kingfish note: Keep in mind the report is based on the 2014 audit. The 2015 audit is due this summer.
Note: Mollie to rip off in 3..2....1.....