Tuesday, March 14, 2017

City Council makes its $90 million march.

The Jackson City Council voted 3-2 to approve a resolution leveraging future 1% sales tax revenue to obtain a $90 million loan to fund infrastructure projects on February 27.

The city's financial adviser, Robbi Jones of Kipling Jones in Houston, explained the loan to the city council.  She said the city will borrow $90 million from an unnamed bank.  $80 million will be used for infrastructure projects while $10 million will be held as a "cushion".  Eleven investment banking firms were invited to present financing options to the city.  However, all but one offered traditional bond deals.  Bond pimps gonna bond pimp.  One bank offered to provide $90 million but carry the loan on its books instead of dumping it off to bondholders.

JJ has learned the bank is JP Morgan/Chase.  A term sheet was offered to the city on February 16.  The losn is a two-year note.  The city will have to refinance the loan in two years.  The current interest is under 2% and based upon the 30-day LIBOR rate.* The loan is structured as a line of credit.  The bank will allow the city to use a monthly drawdown schedule.  The city can use the funds only for projects approved by the 1% Sales Tax Commission.  They city pays interest-only on the first draw until there is another draw.  The commitment fee is less than 0.3% of undrawn funds.  A large portion of the loan will be used for the Tiger grant projects (West County Line Road and North State Street).  The specific details of the Tiger grant projects will be provided in a separate post.  (Discussion of Tiger Grant begins at 14:00 and ends at 55:00).

Councilman DeKeither Stamps protested that the commission was "interjecting itself into lenders and banks."  However, city attorney James Anderson said the statute limits the use of the money through the approval of a master plan. The commission has no actual authority to borrow money or stop the city from doing so.  Mr. Stamps then said he wanted some of the money to be used to hire more employees and purchase more equipment in the public works department.  He claimed the number of employees in the public works department has fallen from 600 to 300 employees.

Interim Public Works Director Jarriot Smash said the primary reason for obtaining the loan was to fund the Tiger grant.  The price tag for the Tiger grant projects jumped from $19 million to over $38 million.  He said none of the money would be used for hiring employees in the public works department.

However, the city council members protested that the administration had not provided them with a schedule of projects or costs of the projects.  Councilwoman Margaret Barrett-Simon took strong issue with Mr. Smash even though she voted for the resolution.  She said (54:50):

We are asked to make this huge decision about whats before us today but we aren’t just comfortable without knowing exactly where the money’s going and its like in the sky somewhere and Lord knows, we need to have these facts to make a decision as monumental as this one. 

Hendrix chimed in and said he should be able to immediately tell constituents how the money will be spent. He said the council would like to see a list of projects, estimated costs, and a schedule for when they would begin.

Councilman Ashby Foote pointed out that the city would have to draw down the line of credit within a year.  He said the interest payments will be $1.6 million per year.  He said "I can’t imagine we have the capacity to do this much work in a year. My question is why the $80 million. (1:18:00) Why not $30 million? That gives us money to give the matching grant and move forward."

Ms. Jones said that this was the deal offered by the bank and that the terms could change for the worse if the city waited to borrow the money.   Mrs. Barrett-Simon somewhat disagreed (1:21:30):

I think it puts us in such a bad position here not to have concrete answers. The city knew which projects would be funded by the loan.  The council should have been the first to know so that we could negotiate ourselves . But right now we got a March 1 deadline to hold these rates in place . Our backs are against the wall. We risk losing two or three very important projects if a decision isn’t made and yet there are some folks up here who have no idea what is going to go on in their area of town. … It’s not a good position to put this council in.
Melvin Priester, Jr. urged the council to approve borrowing the funds.  He said (1:06:00) "We gotta do something on state street.  I see these as projects we have to do.  If we do nothing, we still have to fix State Street and County Line road but then don’t have $20 million from government."  

The city council voted 3-2 for the inducement resolution** but did not give its final approval.   The resolution will go to the Mississippi Development Bank for its March 8 meeting.  However, the resolution was not presented to MDB at the meeting.  The public notice advertised in various newspapers states that the city will present to the resolution to MDB in April.

Despite the protests of Mr. Hendrix and Mrs. Barrett-Simon, they voted along with Mr. Priester for the resolution.

*The LIBOR 30-day rate was 0.78% on February 27 but is 0.85% today.

**MSRB defines inducement resolution:  "The first “official action” or evidence of official intent indicating an issuer’s intent to issue certain types of private activity bonds"

Kingfish note: Has anyone noticed that not one single mayoral candidate has objected to Jackson's borrowing $90 million? Guess they all can't wait to get their sticky fingers on this honey pot.


Anonymous said...

Those sounds you just heard? Corks popping at Socrates Garret Enterprises. 90 million will by one hell of a lot of mentoring.

Anonymous said...

Another ephemeral scheme to "save Jackson".

Anonymous said...

If I were a buyer of this bond or an underwriter I would probably add a few stipulations on exactly what is being paved, constructed, fixed and by who.

Anonymous said...

What a crock of "SHIT"---this is the final nail in the coffin. The Governor needs to step in before it is really too late. City of Jackson needs to be totally controlled by the State and the National Guard needs to patrol the streets.

WOW can you people not see the writing on the wall. Michigan all over again !!!!!!!!!!!!!!!

Anonymous said...

"The main reason this money is needed is for the Tiger grant" which is 38 million . Is match or just money to complete the project ? Either way if managed right this should treated as all Federal money and all Federal rules should apply. Good chance City will not get Federal money since it will not follow process as required. So all the 90 million will be spend and O Federal will be gotten and maybe some road will get built or maybe now at all. Some of the money may be paid back through sales taxes or maybe not?

Anonymous said...

Much ado about nothing. But good that you posted this farce, KF.

Loan isn't about to happen - lender isn't going to make the loan without better resolution of what money is going to be used for, approvals, and agreements that don't exist.

Poor Tony isn't going to be able to finance his campaign after all. Problem is, it appears that the other candidates (maybe exception of Crudup) were all hoping that this loan would go thru so that they could get their paws on the dollars.

Anonymous said...

Poppycock. The TIGER grant award stated the total project cost was $35.5 million in 2015. It hasn't grown from $19M to $38M necessitating this loan.


Anonymous said...

Who is Socrates Garret Enterprises?

Anonymous said...

The devil is in the details and Priester conveniently avoided telling his Facebook sycophants that this deal has details straight out of Hades.

Ms. Jones said that this was the deal offered by the bank and that the terms could change for the worse if the city waited to borrow the money.

Go to hell Ms. Jones.

Anonymous said...

The TIGER award stated that the project cost was $35.5 million. It has grown in the past three months to $38.5 million. Problem was that the city did assumed that they could provide the matching funds from the 1% money using this borrowed money, but they told the Sales Tax Commission that only $4 million was required as a match. Story back then was that this was an 80/20 match when in fact they knew all along that it was a 50/50 maximum federal match. Check out Stamps question in the video when he asks about the 80/20 and is told that he was correct. Priester speaks up but is not acknowledged that it was 50/50. Looks to me like the council was not given straight up info way back when, or even last week in this meeting.

But 4:31 is correct - city has to have the $38 mil in the account before they can start, even though the feds are going to pay $19 mil. So a major reason for this grant is to fix one road (North State) and to help Tougaloo College develop their land. Lots of money for little return.

Anonymous said...

Lets not forget the Fed is getting prepped to raise rates. Not LIBOR but ultimately connected to the world banking markets. .75% may be 5.00% before the first maturity date.
I also think they have the figures backwards, in reality it will be $10 infrastructure and $80 million cushion.

Anonymous said...

Loaning money to those idiots??

Are you kidding me??

Talk about unsecured !!

Anonymous said...

After financing and payoffs there will easily be over $300 MILLION in debt from this new raping, the Convention Center failure and the Siemens fiasco.

We've seen this before. This is how bankruptcies are made. Jackson is the biggest foolish mark out there.

Anonymous said...


We have a winner!!!

@7:50 nails it!!!

Too good to be true teaser today and no choice but to get locked into a higher muni rate than available in today's market two years from now after the Fed jacks it up.

They have stupid written on their foreheads downtown.

Detroit Here We Come said...

More deep shoe leather enterprise reporting that nobody in metro media will touch until KF writes the story and they rip him off. Donner hasn't figured out yet that leading money to all ready hocked vulnerable black communities is racism.

Anonymous said...

Are all consultants hired by this administration from out of state.
I thought the mayor was big on local minority's hires.

Anonymous said...

Antar should take a page out of his dad's playbook and demand a vote on the $90m. Chokwe got out and talked to the people about the 1% tax with great success. Antar should say that the people need to be consulted again before this obligation is taken on. Isn't that what his whole solidarity economy and shared democracy message is all about?

Anonymous said...

I can't believe no one has commented on Councilman Stamps wanting to use borrowed money to pay for new employees in the public works department. As Haley used to say, you can use one time money to pay recurring expenses. It's this train of thought that has gotten the city to where it is now.

PittPanther said...

8:18, believe me, I saw Stamps' stupid comment about using the $90M to hire employees. As far as I'm concerned, that comment eliminates him from any serious consideration as a future mayoral candidate.

Anonymous said...

Does anyone know how much revenue is coming in each year to pay the notes? With the time it takes to get government projects done, just use the revenue to do the work. No borrowing. may have to save a couple of years while the work is being engineered.

Kingfish said...

Around $13 million a year.

$40 million collected. $31 million or so obligated. Around $6 million spent.

Anonymous said...

So, the City applies for a grant saying it had a 50% match in the bank for a shovel ready project. It get approved over many many other projects at the national level and now we find it does not have the match but will try to borrow it. This was good enough was the Obama bunch but this is fraud to normal people. When the project was approved City was to have had the money ready at that time. What does Dick Hall and MDOT do about this mess or the new Federal Secretary of DOT? The Tiger grant was made based on a lie and should be voided.

Per MS DOR said...

March 1, 2014 to June 30, 2014 = 3,459,706
July 1 2014 to June 30 2015 = $14,099,701
July 1 2015 to June 30 2016 = $14,304,384
July 1 2016 to February 28, 2017 = $9,196,003

Total-to-Feb 2017 = $41,059,794

Anonymous said...

I can't believe no one has commented on Councilman Stamps wanting to use borrowed money to pay for new employees in the public works department.

Are you familiar at all with the Democrat Party?

De'Keither Stamps said...

My comments are that the 1% sales tax should be for employees & equipment. All we are doing now is making contractors rich. So when I say we should use this money, I mean 1% sales tax money should be used to build internal capacity. Also we shouldn't use $40 million on one street. We also shouldn't be giving any mayor $90 million this late in a term.

De'Keither Stamps

Anonymous said...

Thanks for clarifying, Mr. Stamps. You have a point that the workers are going to do the work not pencil workers. However, the master plan is the sticking point. That is an engineering/political product. The Lord Mayor has to lead. Say why N. State must be done and why the cost is so high. Its probably because the city has no engineering records of the infrastructure beneath the pavement. Like Fortification they will discover the problems as they excavate and have to speculate that the entire swath of the lines will need to be dug out and replaced. That may be the case for other traffic arteries being contemplated. Hence the financial hurdle. I don't trust anybody with $90M. Lastly the engineers and contractors who patched the streets and sewers for the last 40 years are the same ones that left no records of infrastructure. They are part of the problem as the Councilman stated.

Anonymous said...

Why aren't you demanding that the loan be put on the ballot Stamps?

Anonymous said...

Forget the master plan, just put the workers and equipment to work for the broken section nearest the city hall. Take a bite out of the elephant each day and eventually the carcass will be eaten up.

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