Jackson Free Press

Read the city attorney's letter
Read the executive summary

Details on financing for the proposed convention center hotel are still under wraps, as the city puts together an official proposal for the Jackson City Council that may include using funds designated for redevelopment of areas affected by Hurricane Katrina. Mayor Harvey Johnson Jr. presented an executive summary May 18 to council members recommending that the city help finance the $200 million mixed-use development along four blocks of Pascagoula Street.

The Jackson Free Press obtained the executive summary, provided by an anonymous source, recommending the use of urban renewal bonds to help the developer, TCI-MS, finance the project. The summary also discusses the use of Gulf Opportunity Zone bonds but does not provide a dollar amount.

The JFP submitted an open records request for the summary to the city, but City Attorney Pieter Teeuwissen wrote in a June 15 letter that the document could not be released because of state law that exempts records containing "trade secret or confidential financial information" from public inspection.

The website of MJS Realty, the entity that formed TCI-MS, states that plans for the Capital City Center consists of two hotels, residential, retail and office space along four blocks of Pascagoula Street.

The 2005 Gulf Zone Opportunity Act created economic incentives for developments in areas affected by Hurricane Katrina. The act's tax-exempt bonds fund construction of commercial projects that help foster economic growth and boost tax revenues. The deadline for the bonds to be issued, however, is Dec. 31, 2010.

Kathy Gelston, Mississippi Development Authority director of financial resources, said she couldn't discuss the specifics of TCI-MS' financing because the project is ongoing, but confirmed that the Capital City Center development qualifies for GO Zone bonds. The bonds can't be issued until the developers present a letter of credit from a bank or find a buyer for the bonds.

"We are issuing bonds as developers are coming in and are ready to break ground,"Gelston said.

Gelston said that MDA still has approximately $1 billion in GO Zone bonds available for projects that qualify. She also said that because it takes about three months for the bonds to be issued, developers would ideally have their financing in place by August or September to meet the December deadline.

Rick Hill, city director of finance and administration, said he could not comment on the financing specifically relating to the Capital City Center development, but could only address the process in which municipal bonds are commonly used.

He said that the city sells bonds to underwriters who then resell the bonds to investors such as Morgan Keegan or Merrill Lynch. Typically, the length of time for the city to pay back bonds with interest is 20 years.

Hill said the city is ultimately the responsible party for making sure the bonds are repaid, but in financing development projects, the goal is that the development pays for itself by generating revenue.

Johnson's executive summary states that revenue from the hotel and other developments would go to bond payments, while reserve funds, deficiency obligation payments and the deed to the property would be used if TCI-MS failed to make payments. The executive summary states that the developers will pay a fee of $3 million to $6 million when the deal closes and that money will be placed into a reserve fund.

The summary states that TCI-MS has acquired $2.9 million in HUD Katrina Community Block Grant funding for infrastructure improvements on the site. The summary also states that the developer will enter into a Workforce Integration and Minority Participation agreement—a contract to ensure that minorities are hired for construction—with the Jackson Redevelopment Authority and Harrell Contracting Group of Jackson.

Ward 2 Councilman Chowke Lumumba said he was waiting on a detailed proposal before commenting on the financing of the project, but said he would make sure the minority agreement is upheld.

"There must be some kind of contractual obligation for people doing the project to involve significant ownership of the black community and any other community that is underrepresented," he said. "… The percentage of black involvement (in other projects) has been too low and that's why we need to make sure the percentages are high enough to bring an impact."

TCI is closely connected with Basic Capital Management founder and former CEO Gene Phillips, who former Mayor Frank Melton championed for high-price development in Jackson. The JFP previously reported that Phillips has a history of controversial business involvements and has been indicted on criminal charges, but never convicted. Phillips is also the founder of Prime Income Asset Management, a real estate management company that has more than $3.54 billion in assets, according to his website.

Previous Comments

ID

158256

Comment

it's important for the city to have a convention center hotel. However, it would be nice to have a little more transparency from the Mayor's office here. Really. According to the executive summary, it looks like the city will be on the hook for a whole lot of liability. i'm not necessary against that, but i sure don't want to give away the store just because we're desperate. I would just like to know EXACTLY how much we (the city, the county, the state) are subsidizing this project and how much THEY are putting up, and how much they are going to make on it, and what the risks are. Is that kind of transparency too much to ask?

Author

msnative1943

Date

2010-06-19T15:01:59-06:00

ID

158259

Comment

Not very transparent is it.

Author

QB

Date

2010-06-21T10:44:17-06:00

ID

158267

Comment

It's extremely important that citizens know what the city is getting into, especially when you read the last paragraph of the story. We could be dancing with the devil.

Author

golden eagle

Date

2010-06-21T14:38:29-06:00

ID

158375

Comment

While the building activities will create jobs for a few years, do we really need to be building huge hotels in an awful economy? I would love to see an actual economic impact study done by an outside party before we spend taxpayer money on this. Nobody wants or needs to waste money in this economy and the area is already saturated with hotels.

Author

Jacksonlibertarian

Date

2010-06-28T08:54:19-06:00

ID

158378

Comment

The area is not saturated with hotels. A new hotel with a high profile would be a benefit to the city. There are a certain number of hotel rooms in Jackson which could well go offline for the greater good of all concerned. A major downtown convention hotel is needed in order for the convention center to work properly. Busing people in from I-55 won't work for the convention trade. Meeting planners studiously avoid convention centers without an attached hotel. As I have said before, Crowne Plaza should not be the brand for the hotel. Something stronger is needed. IHG is a strong group, but their Inter-Continental brand is considerably weightier than their CP brand. Even Sheraton, destabilized as it is, would be a stronger brand than CP. The financing for the hotel is quite another matter and I am in full agreement that the process must be transparent.

Author

tombarnes

Date

2010-06-28T10:18:39-06:00