Ellington

See the presentation to city council members (PDF, 1.5 MB)
This story has been updated to reflect a correction.

The developers of a $200 million convention center hotel and multi-use development along four blocks of Pascagoula Street can move forward after Jackson City Council members approved a cost-sharing resolution in a 4-to-1 vote this morning.

Ward 1 Councilman Jeff Weill voted against the resolution, while Ward 3 Councilman Kenneth Stokes and Ward 2 Councilman Chowke Lumumba were not present for the vote.

"The city is being asked to co-sign onto millions of dollars in debt, and given the precarious situation with the city's finances, we don't need to do that right now," Weill said. "The city will be co-signing the note to get the financing done and the lower interest rate. I'm in favor of a hotel project in downtown, but not in this market, when the city is running out of money." Weill then questioned if the developer's projected revenues for the project had been fact-checked.

The resolution is only a preliminary outline of a financial agreement between the developers, TCI-MS and the city. The resolution calls for the city to issue an unspecified amount of bonds to finance the project. The city is responsible for 50 percent of the debt service, or $3 million if the developers are unable to pay. The developers also will create a reserve fund starting at $3 million to $6 million when the deal closes, and the fund will increase to $17.5 million over the course of 30 years.

City Attorney Pieter Teeuwissen said the non-binding resolution is just "one step of many." Because the developers are also securing GO Zone bonds and New Market Tax credits, it is unclear how much the bonds will cost. According to the resolution, TCI-MS is investing $105 million into the project from private funds. Teeuwissen said council members would have to approve each specific financing measure, but the resolution allows for TCI to move forward on the project because it gives assurance to investors and banks that the city is interested in pursuing the project.

During a presentation to council members yesterday, Mark Small, president of MJS Realty, and creator of TCI-MS, touted the economic impact he promised the development would have on the city. He said the development, named The Capital City Center, would bring the city an estimated $26 million in tax revenue over 30 years and provide 164 permanent jobs.

During yesterday's presentation, Weill was the only council member to question the city's role in financing the project.

"Can you tell me, in layman's terms, what the city is being asked to do in the as far as financing is concerned?" he asked. "Please be as clear and as simple as you can."

Steven Hattier, finance consultant for MJS, explained that obtaining financing for the project was difficult to do considering the poor economy, but the ultimate goal is that the city would never have to pay.

"We expect the project to be self financing, but as credit markets have dried up and financing for new construction--or projects that do not already have cash flow already associated--there isn't a lot of availability in credit," Hattier said, adding that the role of the city was to be a financial "backstop" so that the project could obtain credit to move forward.

Jackson Mayor Harvey Johnson Jr. advised council members to vote for the project yesterday, saying that without the city's help, developers would incur a 9 percent interest rate for the bonds, but would only pay 6 percent interest in bonds with the city's financial backing.

"This drives the interest rates down and makes the deal more palpable for everyone," Johnson said. "If we don't (pass the resolution), the deal wouldn't go through, and the money would be too high."

Johnson also said the resolution's Tax Intercept Agreement would provide an additional safeguard by allowing the state to use sales tax generated from the property to pay the debt service in the event that the developers failed to pay.

In 2008, the city loaned TCI-MS a $7 million through the U.S. Department of Housing and Urban Development for the development of the hotel. The resolution calls for the TCI-MS to repay $2 million of the loan in January 2011 and repay the remaining loan's principal by Jan. 1, 2013.

Mark Small said it isn't uncommon for MJS Realty to secure public financing for many of its projects such as the Baronne Center in New Orleans, a hotel and mixed- use development that Small said was using GO Zone bonds.

The realty group's website also lists plans for a 19.24-acre, mixed-use development, similar to the Capital City Center, in Mesa, Ariz.

Patrick Murphy, project manager for the city of Mesa, said the development, named Southern Plaza, has yet to begin construction because of lack of financing and the economic downturn. Murphy, who was unable to put a price tag on the development, said MJS had not yet requested the city's financial backing.

"I talked to them last month, and they said if the economy improves or continues to improve, then they will proceed with a project," he said.

Small said that he hoped to secure all financing by October, and start construction on the project shortly afterward.

Read more about the development and its convoluted history in this earlier story.

In a previous version of this story, JFP reporter Adam Lynch misquoted Ward 1 City Councilman Jeff Weill saying that the city is being asked to co-sign onto billions of dollars of debt. Weill said the city is being asked to co-sign onto millions of dollars of debt. The Jackson Free Press apologizes for the error.

Previous Comments

ID

158439

Comment

I still don't feel comfortable with the city dancing with the devil on this because of the company behind this.

Author

golden eagle

Date

2010-06-30T08:26:40-06:00