City Banking on Future Revenue | Jackson Free Press | Jackson, MS

City Banking on Future Revenue

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Mayor Harvey Johnson urges residents to add their information to the CodeRED database.

Read an excerpt from the report (PDF)

The city is looking into the possibility of refinancing its general fund debt in hopes of saving an additional $27.6 million over the next five years after a study released to city council members yesterday predicted a $48.5 million budget shortfall by 2015.

Atlanta-based Malachi Financial Products Inc. and Virginia-based Public Financial Management, Inc. suggested the refinancing as one possibility in a larger money-saving plan that also included employee furloughs, increasing property taxes and eliminating city services. The city currently levies a 58.03 mill tax on assessed value and land. The proposal calls for increasing property taxes by 2 mills, which means that a house assessed at $85,400.00 would pay $512.58 in property taxes with the increase. Two mills equals .002 cents additional tax for every dollar of assessed value.

City Deputy Director of Administration and Finance Rick Hill said the city, by refinancing its general fund debt, is delaying debt payments that are currently due, to free up excess cash that the city can use toward its deficit by 2015 if the city does not make drastic cuts to its expenditures or raise revenue through tax increases.

Hill added that the move comes with two disadvantages: "You're moving the debt payments out, but paying more interest. (Also), on out in the years, you'll be paying that money back, so you'll have to have money then to make that payment so the city's millage will be going back up out into the future. We've got to plan how we're going to figure out how to cover that millage increase out into the future."

Hill said the city would be responsible for an extra $1.6 million in additional interest payments by delaying its debt payment, but hoped the city would be in a position to benefit from upcoming projects within the next five years that will generate new sales tax to counter the delayed debt.

"What this does, is it buys us some time to get the new Convention Center Hotel built, buys us some time to get the Farish Street Entertainment District development online, and gives us time to get out of this economic downturn we're all in," Hill said. "Hopefully the Capitol Green Project can also be online to get our sales tax back to where it needs to be."

Farish Street developer David Watkins said he expects three new entertainment businesses to open their doors on Farish Street in October, and expects his renovation of the Standard Life Building to be complete that same year. In the meantime, the Johnson administration is working with the city council on providing urban renewal bonds to developers of the $200 million Convention Center Hotel development along four blocks of Pascagoula Street. Hill's reference to the elusive Capitol Green project describes a proposed mixed-use neighborhood, assembled by multiple developers, on Commerce Street.

A short-term deficit elimination plan proposed by the Malachi Financial Products, Inc. and Public Financial Management, Inc . recommends a flurry of potential expenditure adjustments, from renegotiating a security contract for the city train station (potentially saving $1.4 million by fiscal year 2015) to eliminating school crossing guards (potentially saving $2.5 million by fiscal year 2015).

The recommended 2-mill property tax increase, which could generate $1.6 million in fiscal year 2011 and a tax exempt property audit and expand state payment in lieu of taxes fee, which could generate $23.9 million by fiscal year 2015--provided state legislators agree to the deal.

Ward 7 Councilwoman Margaret Barrett-Simon said she was startled by the potential for loss, but pleased with the number of options for dealing with it.

"I would prefer working with the city's bond debt before we fire employees or raise taxes," Barrett-Simon said yesterday.

5/20/10 This story has been updated to reflect the following correction: A house assessed at $85,400.00 would pay $512.58 in property taxes with the increase, not $85,400,000 as previously reported. We apologize for the error.

Previous Comments

ID
158073
Comment

The City of Atlanta, Emory University of Atlanta, Georgia State Univerity of Atlanta, the Woodruff Arts Center of Atlanta and the City of Marietta, a suburb of Atlanta, have all lost millions of dollars in the form of higher interest payments by using the financial instruments and strategy cited in the article above. These Atlanta governmental and non-profit bodies also lost millions of dollars in the form of huge fees paid to bankers and brokers when the Atlanta entities had to cancel the contracts (a possibility NOT cited in the article above). Hmmmm? It looks like one of the financial advisors mentioned in this article is from .....Atlanta! Below is a link to an Atlanta Journal- Constitution news article that gives a more indepth rendition of this financial strategy from Hades. http://www.ajc.com/business/paying-a-price-for-538111.html Let the buyer beware!

Author
FrankMickens
Date
2010-06-07T23:44:10-06:00

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