Thursday, March 24, 2005

Board OKs Forex study by 3-2 vote

Staff Writer

The Holly Springs Board of Aldermen, during a special recessed meeting Tuesday night, voted 3-2 to pursue a contract with International Forex Group to study the city’s credit worthiness and to register its old bonds.

A motion by alderman Tim Liddy to obtain quotes from three companies that have experience with helping Mississippi municipalities through this process was stopped when Mayor Andre’ DeBerry told the board he would veto a motion for quotes.

Thereafter, alderman Russell Johnson made a motion to back the mayor’s recommendation to pay $180,000 to Forex for the bond rating and registration process. Alderman Naylond Hayes seconded Johnson’s motion, and it passed with the vote of yeah from alderman Garrie Colhoun. Alderman Nancy Hutchens and Liddy voted nay and Johnson’s motion passed by a 3-2 vote.

The board room was filled almost to capacity by a cross section of individuals from across the community, many of whom seemed to favor the mayor’s proposal, sometimes punctuating the mayor’s nearly two hours of remarks with amens or other affirmative words.

A full account of the Tuesday night proceedings leading up to this vote will be published in next week’s newspaper.

The following is a report from nearly three hours of boardroom discussion on the Forex proposal that took place last week, during the March 15 meeting.

March 15 board meeting

Mayor DeBerry pushed the board to no avail for several hours last week for a motion to hire International Forex Group to prepare a credit rating for the city.

The aldermen said they need more information about the company and the potential benefits and risks to the city.

DeBerry argued that opportunity knocks only once and the risks of investing $180,000 for the bond rating and registering process would be worth it - particularly if the process opens a way for the city to borrow money for revenue bonds for specific projects.

“At some point we have to start doing something,” said DeBerry. “Some doors of opportunity open and you have to start walking through these doors.”

DeBerry said the bond registration process would provide another avenue other than state and federal grants and loans to create revenues for projects.

“No question the tax base is dwindling and the industrial base is not increasing,” he said. “The tax base is not there and several options before us - a property tax increase - is not a plausible option. A sales tax increase has to go through the legislature.”

Alderman Tim Liddy asked how much a bond rating would cost from another provider.

DeBerry said he had hoped for a decision at the meeting.

“We have really discussed up and down and sideways,” he said. “I think we gather information and never would be able to get enough information. There will always be caution. I hope we can move on this tonight.

DeBerry argued that grants from the state will be harder to come by.

“This state is in a financial crisis,” he said. “Our ability to get grants from the state will dry up.”

He argued that the financial burden for state-mandated programs, such as the mandated teacher pay raises, will fall back on the local governments.

“I really don’t know how much more information we could get on the table than what we have,” DeBerry said, adding that he understands the board’s hesitation.

“It is something none of us have totally delivered in,” he said. “I think we have to be careful that caution does not move us to procrastination. There is only so much information we can get on the table.”

Alderman Garrie Colhoun asked about a letter containing recommendations from U.S. Sen. Trent Lott.

“Yes, but we have not received it yet,” said DeBerry. “It’s not for documentation or to use to determine a vote.”

Liddy said more information is needed on Forex, even though some of the ideas presented to the board thus far were good.

Deputy city clerk Lisa Liddy asked if there was a way the board could compare costs from different bond rating companies to determine if Forex’s price is a fair market price.

DeBerry argued that the city has acted on quotes for professional services before.

Ken Robinson answered that the $180,000 is the minimum cost from Forex to get the city’s old bonds registered.

“We go back to 1980 and pull any information on bonds from then to now,” he said. “The utility has old water bonds, but the city hasn’t. Their bonds would be rated.”

Liddy asked if a city audit is part of the rating and bond registering package and the credit rating.

Robinson said a separate entity would conduct an audit; that it is important Forex and the audit company act independently of each other.

“What would it cost to have a financial adviser with no business bias to advise us,” asked Liddy.

“Like a CPA or accountant?” asked Robinson.

Liddy said someone has to advise other municipalities in Mississippi on financial planning.

“They could give us a professional opinion is this something we could do,” said Liddy.

DeBerry said to do so would open the process to all professional services to hire a financial planner and undermine the process already in place.

“I see your minds churning,” he said to the board. “Opportunity is something like an eclipse, a stellar event, where everything is exactly right. There are times when opportunity presents itself and we literally have to seize it or we miss it. We have to seize it. Holly Springs cannot continue to be on the back seat.”

Liddy reminded the mayor about the $60 plus million the state obligated itself for on the beef plant.

“Everyone is blaming the other,” he said. “They all admit they didn’t check it out well and it left the tax folks holding the bag.”

DeBerry said once the bonds are registered the board would have to pass a resolution for any project it wanted to issue bonds for - that the process of borrowing money for projects using the bonding process would be examined step-by-step.

Alderman Nancy Hutchens said it was not a good idea to move forward with the first step of bond registration unless the next steps were clear.

She expressed reservations that no one but the mayor and Robinson have access to information in the matter of Forex and bondable projects and how the bonds would be used.

“We aren’t given enough of the pie to fully understand to be able to go to the next step,” she said.

The mayor provided an example of the Holly Springs Commons project and how it was made possible through negotiations and private consultations with state agencies like Mississippi Department of Transportation.

Hutchens reminded DeBerry that his example was one of government working with private enterprise.

“What we’re talking about is the city being part of a project that will be benefitting of commercial development and a hospital,” said Hutchens. “We don’t get revenues from these entities. We are talking about revenue bonds the city is obligated to pay back and when we’ve asked for information, I heard Ken say this company has to be the company we work with.

“But when we went around this table and asked for a non-biased person that’s always been pushed aside. We’re sitting here and have to be the people who take $200,000 from a certificate of deposit. And if we find out this project doesn’t work, people will ask why didn’t y’all spend that money on sidewalks and streets or something else.

“Why someone can’t come in and tell us ... no one has told us the importance of why it’s necessary for a town like us to have it. If I’m going to spend taxpayers’ money, I want to be sold on this project. And I’m not sold.

“If I spend that $200,000, I want to know the next step.”

The mayor attempted to lift the veil on what types of projects such bonds would be used for without giving away too much detail.

“We’re asking the board to look to potential projects to generate revenues. Most projects we have are revenue neutral other than the utility department,” he said. “We are not creating a first of its kind. The facility they are talking about in Tennessee is a major Fortune 500 company. It is already being done.

“We have the natural terrain, the transportation piece, the topography. There are not any in the state that sits on a location where this could work. We have already talked about Sen. Cochran and Lott. That beef stuff will look like ants compared to this project. The steel company is a world wide market. Here we are talking about something of the industry of energy. We’ve shown you where the president himself has invested $760 million in a project in his brother’s state and 20 other states.

“Keep in mind if it dropped in the papers, property values would go up. If we could get past this process, we will come in one-on-one with the board and share information that would kill the project now.”

Robinson adjured the board to keep in mind of a short time frame and said he and the mayor were trying to get through the time frame (of opportunity) without losing it.

The mayor added that the information is time sensitive.

Hutchens and Liddy reminded the mayor that they said there would be a city audit as well as an audit of community resources.

“If they don’t see Holly Springs in good shape, are they going to still want Holly Springs?” asked Hutchens.

Alderman Naylond Hayes asked, “What part of $180,000 are we gambling?”

DeBerry said finding the financial potential of each bond “gets us into an area where we have increased the pool of people who can bid on our bonds.”

Hayes asked if the expenditure of $180,000 would guarantee the city the proposed project.

DeBerry said the city would issue bonds for the construction costs of a facility and once the bonds were paid off, the city would own the facility.

“So, when we say gamble, the $180,000 gets you ... the potential to sell bonds in a more favorable light,” said DeBerry. “This increases our marketable value.”

“I don’t like to gamble unless I can see the light at the end of the tunnel,” said Hayes. “Right now I don’t see the light in the tunnel. Maybe I’m not knowledgeable.”

DeBerry offered that the energy piece of the proposed project would position the city to obtain state and federal funding for the project as well. He hinted that the University of Mississippi and Mississippi Southern would partner in the project.

Robinson said in the design of the project, the city would determine what revenue needs it has on the front end and build that into the design of the project from day one before any bricks and mortar was expended.

Liddy suggested that one of the board perhaps should take the initiative to educate the board about the bond registration process and its uses.

The discussion continued with no motion from the board.

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