CLARKSDALE – A planned $52 million sports and recreational complex, which has the backing of city officials here, will be overseen by a newly created urban renewal agency.
The quasi-governmental entity will oversee the venture and keep the city from having a direct role in the development, according to Dwan Brown, the lead developer on the venture.
Clarksdale’s city government created that agency, called the Quality of Life Commission, to oversee and manage the development. Each commissioner, along with the mayor, appointed one of the five members to the board: Rosalyn Griffin as chair, Adrian Allen as vice-chair, James Norvell Gooden, Jon Magnusson and Chad Robinson. According to Mississippi statute they cannot receive compensation for their services.
The urban renewal agency was formally established at a March 19 city government meeting. But minutes of the Sept. 25, 2017, meeting of the Board of Mayor and Commissioners, show that the city leaders at that early date agreed to execute a Memorandum of Understanding with the P3 Group, Inc., municipal advisor Larry Day, and M3 Architecture Firm, PLLC. Signatories for the city were to be the city clerk and Mayor Chuck Espy.
The Memorandum of Understanding, which Mississippi Today obtained through an open records request, stated that the P3 Group would serve as a development consultant for the project, put together a plan that will quantify the feasibility of the project, work with architects and other advisors as needed and search for private developers to undertake the project. The agreement notes that P3 cannot receive compensation for its services.
The MOU document was signed on Oct. 11, 2017, by Espy, Melonie Lester, Deputy City Clerk, and Brown. Brown said the reasoning for delivering these services for free was because of his relationship with Espy. On several occasions, Espy and Brown have mentioned that they’ve been friends for a very long time and they are both Clarksdale natives.
However, stated in the development agreement between P3 Group and the commission, the commission agreed that P3 will receive a five percent development fee of the capital raised, which will be financed out of project costs. The agreement also stated that Hunt Companies, co-developer on the project, will have sole responsibility for administering and dispersing all project funds.
P3 Group is at-risk, providing upfront costs and overseeing management, Brown added. P3 Group would make money by finding developers and taking a 5 percent cut of what they pledge for the project, about $2.6 million based on the estimated price tag.
The Quality of Life Commission’s job is to issue bonds, file paperwork for tax credits, and create an Urban Renewal Plan, Brown said. The plan, according to Mississippi statute, should detail land acquisition, demolition and removal of structures, redevelopment, improvements, and rehabilitation proposed to be carried out in the urban renewal area, zoning, and planning changes.
According to federal law, a municipality shall have the power to issue bonds to finance urban renewal projects including principal and interest payments for surveys and plans. It also states the municipality shall have the power to issue refunding bonds for the payment or retirement of bonds. The statute also states that the local government shall also authorize a resolution for the issuance of bonds and to not exceed thirty years from the date of the issue.
These revenue bonds used to help finance this project are obligations of the agency and are not the responsibility of the city, Brown said. The city will review the bonds but accept no liability. Repayment of the bonds will be the responsibility of the redevelopment agency, which plans to lease operation of the project to a private firm, thus providing revenue to retire the bonds.
“There’s no way the underwriter or note holder would do this type of project in the anticipation that the city of Clarksdale will support it because Clarksdale — anyone who knows anything about finances knows that Clarksdale does not have the bonding capacity to do this project. This project has nothing to do with the city of Clarksdale’s ability to pay,” Brown said.
He went on to say that the use of urban renewal bonds and new market tax credits will be the primary sources of funding for this project and will be run by an at-risk operator which hasn’t been named at this time.
The projected $50 million construction cost and ongoing operational costs will be subsidized based on existing programs. He provided clarification via Facebook by stating that “a private investment group will be executing a 30-year lease and assume complete responsibility for operating and maintaining the project. … The urban renewal agency is leasing the project to a private investment group.”
But a look around the state at similar developments shows why questions persist around accountability for the project.
In hopes of redeveloping Farish Street, the Jackson Redevelopment Authority (JRA), an urban renewal agency, is currently in court for selling a lease to a private developer who failed to deliver on his promises to redevelop the historic street.
Because the city of Jackson was the grantee, they had to pay back money to the U.S. Department of Housing and Urban Development, which helped the city buy the land. JRA currently owns the property, but the developer holds the lease and development plans are at a standstill.
Other established urban renewal agencies across the state include the Pascagoula Redevelopment Authority (PRA), Gulfport Redevelopment Commission (GRC) and Canton Redevelopment Authority.
State and federal incentives will provide equity to cover a portion of the $50 million development cost of the Clarksdale project, the solar farm will offset electricity costs and reimbursements from the state will offset operational costs, Brown said.
Brown also noted that the estimated construction cost of this project has been reduced to $39 million dollars in contrast to the “high end number” of the initial $52 million projection.
“When you talk about $52 million, that was our worst case scenario, that’s not what we plan on delivering the project for,” Brown said.
Brown noted they are only borrowing what they need, in this case $39 million dollars primarily for construction. This doesn’t include administrative costs, attorney fees and other capital costs, said Brown.
A detailed sources of funds statement was not released to Mississippi Today at this time. Before bonds are issued, Brown said his firm will provide a sources of funds statement to the Quality of Life Commission to prove it has the resources to repay the bonds.
Memphis-based ComCap Partners has been named as the financial advisor for the city’s urban renewal commission and Pam Clarey will serve as their representative. ComCap served as financial advisor for the FedEx Forum, Shelby County, and the Jackson Public Schools. They will be paid on a contingency basis. Brown added that they are registered with the Security and Exchange Commission.
Urban renewal bonds and new market tax credits
Urban renewal bonds and new market tax credits are both issued to improve low-income communities by generating economic activity and creating jobs in those areas. New market tax credits have a state and federal component to them, whereas urban renewal bonds are neither, said Brown.
Urban renewal bonds are revenue bonds that are used in slum or blighted areas that a local governing body or municipality designates appropriate for an urban renewal project and does not pledge the full faith and credit of the government. This means that the only revenue stream coming in will be from the facility, and if there is no revenue, the bonds won’t be paid, he said.
New market tax credits allocates a federal tax credit to private investors in hopes of attracting them to impoverished communities to make equity investments in Community Development Entities, known as CDEs. The goal is to increase jobs in the area and provide lower interest rates for the investors.
“This structure of finances, it’s not like this pie in the sky. These structures have been done in Jackson, Miss. They’ve been done in the Gulf Coast. They’ve been done in other cities — in Atlanta, Ga.,” Espy said. “This is not a secret. It’s just hard work.”
Key players in this project
• The P3 Group and the Hunt Companies, Inc. — a private real estate agency that focuses on real estate investments, military communities, public infrastructure, financial services, and asset services, according to their website — are the co-developers.
• Butler Snow Law Firm will be handling and structuring the new market tax credits in order to monetize them, said Brown, and they will serve as a bond counsel for the Quality of Life Commission. (Editor’s note: Tray Hairston, an attorney with Butler Snow, serves on the Board of Directors of Mississippi Today.)
• CORE Construction will be the at-risk construction manager, which means they would give the pricing in a guarantee that they would deliver the project for that price, said Brown. CORE provides building services, including commercial, municipal, K-12, municipal, and solar.
• Atlanta-based Chasm Architecture will handle the design of the facilities for the project. They have completed projects ranging from aviation and academic to corporate and student housing. Brown noted that they operate under Chasm Companies P.C. in Mississippi.
• IMS Engineers, based in Jackson, will handle the civil engineering component of the project. Their expertise is in consulting, engineering, technical, and more, according to their website.
• Piper Jaffray has come on board as the managing bond underwriter. Piper Jaffray is an investment bank and asset-management firm. They provide financial and advisory services in sectors such as agriculture, business, energy, finances, and others.
All of these companies assist public and private clients. When commission member Gooden asked for contracts, Brown said each entity is either contracted under P3 Group or Hunt Companies.
“The other parties do not contract with city – only developers contract with city and we contract everybody else under us. So on the construction side – CORE, Chasm – they’re not working under contingency. They’re getting paid by the development team,” Brown said to the group of commissioners.
“The reason we did it that way is if Hunt has to provide a $50 million or $40 million dollar guarantee to the agency or the city, they have the capacity to do that and Core will provide payment and performance bond to insure that everyone working on the contract gets paid when construction starts,” he said.
Part III of this series is coming soon. Read Part I here.