Do public statements, documents differ on plans for royalty funds?

Published 12:05 am Sunday, June 14, 2015

Documents, including an email from Vidalia city accountant Ashley Anderson. (Illustration by Ben Hillyer)

Documents, including an email from Vidalia city accountant Ashley Anderson. (Illustration by Ben Hillyer)

VIDALIA — Even though Vidalia officials have said they had no plans to use hydroelectric royalties for the proposed Square on Carter project, documents from the state bond commission indicate the city planned to at least use them as security for a loan and direct payments out of the hydro royalty account.

Loan documents likewise indicate an originally optimistic timeline that would have had the project under way within the year.

Mayor Hyram Copeland, Consultant Laurence Leyens and Concordia Economic Development Director Heather Malone first publicly presented the Square on Carter project in March at a meeting of the Concordia Chamber of Commerce.

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Crafted by consultants with The Orion Planning Group after several meetings in 2014 with city leaders, business people and residents, the proposal is part of a wider master plan for the city and calls for the purchase of adjacent parcels of property near Walmart on U.S. 84.

The parcels — 31.67 acres owned by Scroggins Investment Co. and 32.72 acres owned by BCHT, LLC. — would then have public infrastructure such as streets and utilities installed in an effort to lure residential, commercial and business interests to the pre-developed site.

After several months of scrutiny and an hour of testimony before the Louisiana Bond Commission, the commission instructed the city to host public hearings about the matter.

Bond commissioners said the city was not in compliance with its ordinance dictating how it can use its revenues from participation in the Sidney A. Murray Hydroelectric Station.

Hydroelectric funds

During the public hearing about the project June 9, Mayor Hyram Copeland said the city is not asking to use hydroelectric funds for the project. The funds were included in the application, he said, because the commission requires the city to demonstrate all of its financial capacity.

“When we are asked by the Senate bond commission to show all streams of revenue, it was listed,” he said. “It’s not in the budget.”

Correspondence between bond commission representatives, attorneys serving as Vidalia’s bond counsel and Vidalia’s city accountant contradict the mayor’s statement.

In a Feb. 19 email to Alan Offner of Foley & Judell, State Bond Commission Debt Analyst Wanda Sittig asked several numbered questions to clarify the $2.5 million bond application, including about which funds would be used.

“(Application) indicates funds to be used are general, hydro royalty and sales tax, is that correct?” Sittig wrote in the email. “Which fund will the actual debt service payments be paid out of?”

Offner forwarded Sittig’s questions to City Accountant Ashley Anderson, who responded in a Feb. 23 email, “Debt service payment will be made out of the hydro royalty account.”

Anderson did not answer her phone extension in city hall Friday, and her voicemail box was full. She did not respond to an email — which cited the original correspondence — asking for clarification.

Even if the city’s apparent willingness to use hydroelectric royalties — or at least the account in which the funds are kept — has changed, as recently as late May the bond commission appeared to be under the impression the hydroelectric funds were in play as collateral.

On May 21, Bond Commission Analyst Cassie Berthelot issued an analysis that includes the lines, “The proposed debts … are secured by the Town’s Hydro Royalty Fund” and “Coverage of the proposed debt was calculated based upon utilization of the hydro royalty fund.”

Bertholet’s analysis notes the city “anticipates receiving a return on investment not only through the sale of property, but also through the increase of tax revenue (both sales and ad valorem). Also, the (City) is anticipating an influx of permanent jobs throughout the development in both service and professional.”

During public hearings on the matter, Anderson listed those potential revenues as ways the project would pay for itself, and said several existing revenue streams — including general ad valorem taxes, sanitation fees, sales taxes, utility revenues and the wholesale of electricity — could be used before excess hydroelectric revenues were touched.

The bonds

While taking out a bond does not mean that a municipality automatically draws down on the debt right away, loan documents indicate the city was prepared to turn dirt on the project as early as July if its original timeline had been followed.

The Vidalia Board of Aldermen had originally voted to approach the bond commission — which assesses the town’s financial ability to take on bond debt — about the project in February, and was initially placed on the commission’s March agenda.

After questions about the project arose, the matter was taken off the March agenda until the city could address the questions to the bond commission.

It was later placed on the May agenda, but the commission took no action and instead ordered the city to have public hearings about the matter, especially relating to the possible use of hydroelectric revenues, before it would be placed on the June agenda.

The proposal was not placed on the June agenda, however, after the bond commission received legal advice that the project might not pass state Constitutional muster as a valid “public purpose” project.

In a Feb. 13 application to the commission for a $2.5 million bond with a 4-percent interest rate, the city notes no general fund or hydroelectric funds are yet included in the budget for the project.

In a column listed as “Amount of Available Excess Revenue” on the application, the city lists $753,808 as being available in the general fund, $753,808 in the sales tax fund and $5.4 million being available in the hydroelectric fund.

Listed as security for the loan on the form was, “a pledge and dedication of the excess annual revenues of the issuer” — in this case, the City of Vidalia.

The listed purpose for the loan was “the purpose of constructing, installing and providing streets and utilities services within the Town.”

The expected closing date for financing listed in the document was June 30 — the last day of the fiscal year — and it said plans and specifications would be completed by May 31.

The document lists July 15 as when construction would commence, with construction wrapping up March 31, 2016.

An application for a $4.5 million bond at a 5-percent interest rate sought for “the purpose of providing funds for purchasing land within the Town” likewise pledges excess revenues as security and lists the general fund and hydroelectric fund as available excess revenue.

The application for the $4.5 million bond was submitted at the same time as the $2.5 million bond application.

The loan document lists May 14 as the expected closing date for the $4.5 million bond.

At the June 2 public hearing, Leyens — who has worked closely with the city on the project — said he has not presented the project to the board of aldermen for approval to move forward with the purchase.

“I have not presented the due diligence yet,” he said at the time.

Due diligence in this case would include — among other things — property costs, developer recruitment and feasibility.

In a March 6 email to Bond Commission Director Lela Folse, Jason Akers of Foley & Judell, the city’s bond attorneys, wrote the city was “still” having conversations with the property owners.

“…We are currently drafting purchase agreements to be sent to the property owners for review,” he wrote. “The purchase price is being based on the appraisals, but they have not yet been included in the purchase agreement. Once the draft is completed and ready to be sent to the property owners we will gladly provide that documentation.”

Concordia Economic Development Director Heather Malone said last week those discussion had essentially fizzled out because land owners and other interested parties didn’t want to proceed with negotiations if the bond commission wasn’t going to take up the matter.

In the May 21 Berthelot analysis, she wrote that the city’s 2015 budget reflects $2,243,265 in excess revenues, “which is sufficient for the payment of the outstanding and proposed maximum annual debt service of $2,246,578.” The debt service amount listed includes that for the $4.5 million bond.

The analysis says three letters of interest had been sent in connection with the project — from Wilmar Construction Company, Southern Heritage Reality and Building and Desai Hotel Group. Letters of interest do just that — express interest — but are not binding commitments.

But the Bertholet document also notes, “…No feasibility study has been completed on the development.”

Copeland could not be reached by phone Wednesday, Thursday or Friday.