City of Biloxi officials are seeking more than $600,000 they say the state owes them and are asking a judge to strike down a 2016 law that swept $79 million of special funds into a state reserve.
A court motion, filed by the city in Harrison County Chancery Court on May 5, says several state officials knowingly violated a 2002 settlement between the Secretary of State’s office and the city of Biloxi by sweeping a special fund that was designed to send monthly rent payments from the Golden Nugget Hotel & Casino to the city.
Because that special fund, held by the Secretary of State, was swept into the state’s multi-million dollar Capital Expense Fund through 2016’s House Bill 878, the city said it has not received $606,000 in payments agreed upon in the 2002 settlement.
“A letter from the Secretary of State’s office clearly stated that moving this money, which was Biloxi money, was a violation of a court agreement,” Biloxi Mayor FoFo Gilich told Mississippi Today. “There really seem to be a number of smoking guns here, but the underlying fact is that city of Biloxi rent money was moved into the state’s Capital Expense Fund.”
The city’s motion calls into question actions by several state officials, including Gov. Phil Bryant, Secretary of State Delbert Hosemann, his chief of staff Doug Davis, Senate Appropriations Chairman Buck Clarke and Herb Frierson, former House Appropriations chairman and current Department of Revenue commissioner. Here is a timeline of the events.
Last week’s court filing is the latest development in a years-long dispute about the land on Point Cadet in Biloxi. In small increments between 1985-1987, the city of Biloxi purchased a total of four acres on Point Cadet. Developers leased the land from the city in 1992 and built the Isle of Capri casino there. Golden Nugget has since taken over that land lease.
In 2002, the Secretary of State claimed the rent from that land, which backs up to the Gulf of Mexico, should be paid into the Public Tidelands Trust, a state fund established in 1989 which takes money mainly from casino leases — about $10 million per year — and sends it to the Legislature, which then awards annual grants to Gulf Coast towns for the upkeep and maintenance of beaches, piers and other waterfront projects.
The Secretary of State, the city of Biloxi and Institutes of Higher Learning, which had operated the J.L. Scott Marine Education Center and Aquarium at the site, settled the dispute over the land in a 2002 court settlement. The terms of that settlement directed the casino’s rent money flowed straight into a Secretary of State-held account, called the Point Cadet Leasing Fund, which was then split three ways between the entities.
The city of Biloxi’s motion filed earlier this month asks the chancery court to enforce the monthly payments set forth in that settlement.
The state’s Capital Expense Fund is replenished every year with unused money from agencies’ special funds. In 2016, House Bill 878 moved $79 million into the state’s fund. In 2017, Senate Bill 2649 moved $32 million into the fund.
The potential for legal troubles over the 2016 law that swept the fund into the state’s reserves did not go unnoticed by officials before Gov. Phil Bryant signed the bill into law, according to court documents.
Several days before Bryant signed the bill into law but after the Legislature passed the final version of the bill, Hosemann’s chief of staff Doug Davis wrote a letter to Bryant, legislative appropriations chairmen and several other state officials pointing out that sweeping the Point Cadet Leasing Fund “may violate the Point Cadet Compromise and Settlement Agreement.” That letter is one of several included in the city’s motion.
A week after Davis sent his letter to Bryant, Clarke and Frierson co-authored a response to Davis, Bryant, Republican lawmakers from the Gulf Coast and several heads of special interest groups. The appropriations chairmen wrote that “Mr. Davis is mistaken as to the impact” of the legislation on the funds, including the Point Cadet Leasing Fund.
“We hope this letter provides you with some insight on how your agency can be run in a more transparent manner,” Clarke and Frierson wrote at the end of the letter to Davis. “It has always been our belief that as elected officials, we owe the taxpayers of this state a government that operates in an efficient manner that does not over charge for services and provides an environment conducive to owning and operating a business.”
Eighteen days after receiving the letter from Davis, Bryant signed the bill, which included the Point Cadet Leasing Fund, into law. Bryant’s office did not return questions this week about whether the governor considered excluding the Point Cadet fund from the law as he has the power to do.
The city also claims that the overall sweeps law should be deemed unconstitutional because of the method in which it was passed, as lawmakers faced tight deadlines late in the 2016 legislative session. In its motion, the city cites a provision in the state Constitution that appropriations bills cannot be passed within five days of the end of a legislative session.
But the bill in question is classified as a general bill, not an appropriations bill, so that might remove the impact of the five day window. City leaders said they will argue on the merits of that bill’s classification, as it included several appropriations, including transfers to pay House and Senate members’ salaries.
Additionally, the city argues in its motion that the Point Cadet Leasing Fund, along with five other Secretary of State funds, was added to the bill after the Legislature signed its final version in conference committee but before the governor signed it.
Records reviewed by Mississippi Today from the House and Senate journals from late April 2016 show that the six additional special funds were added to the bill by unanimous voice consent on both floors before the governor signed the bill. Unanimous consent is one of several ways conference committee reports can be amended after they are signed.
It is not clear who decided to add the Point Cadet Leasing Fund to the list of funds swept under the law. The action was first ordered through a memo sent to House and Senate clerks dated April 19. That memo, obtained by the city of Biloxi and included in the motion, does not list the name of an author.
Neither Clarke nor Frierson, the appropriations chairmen, returned calls seeking comment on the matter.
A spokeswoman for Hosemann, in a statement provided to Mississippi Today on Monday, said the Secretary of State’s office did not make the decision to include that fund in the bill. When the 2016 legislative session ended, Hosemann wrote a letter to Mayor Gilich.
“The Mississippi Legislature is sweeping funds from the Point Cadet Leasing Fund,” Hosemann wrote. “Therefore, these funds will not be paid to the City of Biloxi. Please contact members of the Legislature with any questions you should have.”
In the summer of 2016, after the bill was signed into law, the 2002 settlement between the Secretary of State, the city of Biloxi and IHL was updated to provide that officials would pursue legislation in the 2017 regular session to resolve the problem.
Two bills were filed in the 2017 session, by Sen. Tommy Gollott, R-Biloxi, and Rep. Scott DeLano, R-Biloxi, which would have required the Department of Finance and Administration to pay the city of Biloxi its agreed upon monthly payments directly out of the Capital Expense Fund.
Both those bills died in committee, and the Legislature did not resolve the matter in any other bills before it left Jackson for the year.
Hosemann, in the statement to Mississippi Today, said he hopes the matter can be resolved in the 2017 special legislative session, which will begin on June 5. Bryant, who has authority to set the special session’s agenda, has not yet disclosed which issues he will ask the Legislature to take up.
Here is a timeline of the events involving the Point Cadet fund:
April 18, 2016: A conference committee, made up of three leaders, respectively, from the House and Senate, passed HB 878 that included just four special funds from the Secretary of State’s office. The Point Cadet fund was not included in the committee’s final version of the bill.
April 19, 2016: A memo was sent to the House and Senate clerks, requesting that six additional Secretary of State funds, including the Point Cadet fund, be added to the bill by unanimous floor consent after the funds were omitted from the bill.
April 19, 2016: The House and Senate voted unanimously to pass the conference report for HB 878.
April 20, 2016: The House and Senate voted unanimously to include the six additional Secretary of State special funds, including the Point Cadet fund, in HB 878. House and Senate journals both reflect that unanimous consent was given for “clerical corrections.”
April 21, 2016: The Legislature adjourned the 2016 regular legislative session.
April 21, 2016: Doug Davis, chief of staff for Hosemann, wrote a letter to Bryant, chronicling potential problems with sweeping the funds included in the both HB 878 and SB 2362. In that letter, he wrote that sweeping the Point Cadet fund “may violate the Point Cadet Compromise and Settlement Agreement (effective August 15, 2002).”
April 28, 2016: Appropriations chairmen Sen. Buck Clarke, R-Hollandale, and former Rep. Herb Frierson, R-Poplarville, co-authored a letter to Davis, Hosemann, Bryant and others, explaining that the Point Cadet fund (and others listed by Davis in his April 21 letter) is “an off budget fund that does not require additional authority from which to spend.”
April 29, 2016: Hosemann wrote a letter to Gilich, stating that HB 878 was finalized, and that $1.6 million owed to Biloxi from the Point Cadet Leasing Fund “will not be paid to the City of Biloxi.” Hosemann directed Biloxi officials to the Legislature with any questions they may have had.
May 9, 2016: Bryant signed the bill into law, which included the Point Cadet fund, reflecting the recommended additions from the April 19 memo.
September 29, 2016: The Harrison County Chancery Court ruled that the Secretary of State pay Biloxi owed money from the Point Cadet Leasing Fund. The settlement also included provisions that said the involved parties would seek a remedy to the problem during the 2017 regular session.
January 3, 2017: Sen. Tommy Gollott, R-Biloxi, and Rep. Scott DeLano, R-Biloxi, filed bills that would have authorized the Department of Finance and Administration to pay the city of Biloxi its agreed upon amount directly from the Capital Expense Fund.
March 29, 2017: The Legislature adjourned the 2017 regular legislative session without passing any new law that would pay Biloxi the amount set forth in the 2002 settlement.
May 5, 2017: The city of Biloxi filed a motion in Harrison County Chancery Court, asking the court to force the state to pay $606,000 the city says it is owed. The city also asked the court to deem House Bill 878 unconstitutional.
Editor’s note: The Secretary of State office’s statement provided to Mississippi Today was attributed to Secretary of State spokeswoman Leah Rupp Smith, not Hosemann himself.