Mayor: Natchez will whittle down its debt
Published 12:00 am Sunday, September 9, 2012
NATCHEZ — If each of the 15,792 city residents counted in the 2010 census forked over $1,259, the city could pay off the Natchez Convention Center plus the rest of the city’s $19.8 million debt.
The alternative, Mayor Butch Brown said, is attentiveness and regular debt payments that can — and will, he said — whittle down that debt.
The convention center is the largest chunk of debt the city has at $10.2 million left to pay, City Clerk Donnie Holloway said. The debt is scheduled to be paid off in 2024.
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The $12 million bond was issued in 1999 to build and furnish the convention center, as well as renovate the Natchez Community Center and City Auditorium.
The city refinanced a portion of the bond through an interest-rate swap transaction executed in 2006 with Malachi Financial Products in an effort to save a projected $1.5 million over the next 18 years.
The payments for the convention center debt are split between two separate bonds.
The first portion of the payment comes from the original $12 million bond that was issued in 1999 and will retire at the end of the 2013-2014 fiscal year. The city will pay $550,690 on the bond during the next fiscal year and $543,840 in the 2013-2014 fiscal year.
The other portion of the payment comes from the interest-rate swap transaction. Holloway said the city could not refinance all of the convention center bonds in 2006, so a portion of the remained in the original bond and the remainder was refinanced. As a result, there are now two separate payments for the convention center debt.
The payments for the refinanced portion of the bond will be $476,556 in the 2012-2013 fiscal year and $478,137 in the 2013-2014 fiscal year.
The payment for the refinanced bonds will increase to $1,024,337 in the 2014-2015 and average approximately that until the bond retires in 2024. The payments’ increase coincides with the retirement of the original convention center bond, which Holloway said means that even though one bond is retiring, the city will still be averaging a little more than $1 million in debt service toward the convention center.
The city will pay a total of $1,027,246 on the convention center debt in the 2012-2013 fiscal year, which will begin Oct. 1.
Brown said he is concerned that the city still has $10.2 million left to pay on a $12 million bond that was issued 14 years ago.
Holloway said the city has been paying interest on the bond and will not really start paying off the bulk of the principal of the bond until 2014-2015.
Even with proposed raises and increased salaries on the horizon for the city’s upcoming fiscal year, Brown said the city would meet its debt requirements.
Brown said he believes debt service has been an afterthought in previous administrations.
“Hereinafter, we will always budget debt service first and then we will do the balance of the budget,” he said. “In every unit of government, debt service is the first thing you budget, and I don’t know why that hasn’t been done, but it will be done from now on.”
Brown said the new revenue from the Magnolia Bluffs Casino, which is scheduled to open in December, the annual tax income from the casino and lease payments should cover the city’s debt.
The most recent debt added to the city’s total is the $763,000 mini-bond from Britton & Koontz Bank that was issued in August to purchase the former pecan factory site included in its debt.
The urban renewal bonds for the federal courthouse, which the city has been paying on for the last 10 years, were paid off this fiscal year.
The payment of the courthouse bonds totaled with interest $1.5 million, which Holloway said was spread out in $140,000 annual payments over 10 years.
The city’s total debt also includes a $3 million bond for a street overlay project issued in 2009, $575,000 Natchez Water Works revenue bond in 2005 and a $650,000 loan from Britton & Koontz Bank.
Holloway said the loan was taken out to fund half of a $1.3 million street overlay project after the city failed to receive a $650,000 appropriation from the Mississippi Development Authority a few years ago.
The city is approximately $15 million away from its state-set debt limit, Holloway said. The debt limit for cities and counties is an amount equal to 15 percent of the assessed value of properties in the city or county.
Revenue bonded debt, such as the bonds used to fund the convention center building project and the federal courthouse does not count toward the debt limit.
The City of Natchez’s debt has shrunk from approximately $30 million in the last 10 years at a rate of approximately $1 million a year for nearly the past 10 years. The debt is projected to continue decreasing at the same rate for the next eight years, with the city’s debt totaling approximately $11 million in the 2019-2020 fiscal year.