With another vote on financing for McComb’s wastewater treatment facility expected next week, selectmen at a city board work session Tuesday questioned the city’s financial team about their plans for the project.
By a 3-1 vote on Jan. 8, the board authorized Mayor Zach Patterson to contract with the financial team, but additional votes will be required along the way.
The team — comprised of the Atlanta-based Malachi group as financial adviser, and Jackson-area lawyers from Chambers & Gaylor Law Firm, Harris, Jernigan & Geno Law Firm and May Law Firm — is asking the board to approve a resolution of intent at next week’s meeting that would cover up to $40 million in bond money for the project.
But some selectmen asked why $40 million would be necessary for a project with a $30 million estimated cost, and others asked for an explanation of hiccups in projects prepared by the Malachi Group in Hinds County and for the cities of Okolona and Atlanta.
A $1.8 million bond for a project in Okolona failed to complete the legal process for issuance there, and a separate project in Hinds County raised tax liability issues after some funds were invested outside of Mississippi.
An April 19, 2007, Jackson Free Press article, meanwhile, cited concerns raised by a July 2006 court ruling against Malachi Group CEO Porter Bingham ordering him to pay a consultant for work on Atlanta’s public transportation system.
Bingham reassured McComb officials Tuesday that the out-of-state investment on the Hinds County bonding was both legal and advisable as compared with the interest rates local banks were offering.
He also said his firm had done its job properly in Okolona, and that the bond failed because of opposition by voters there during the legal process.
“It can happen in any municipality where the voters decide they want to go against the decisions of leadership,” Bingham said.
“My firm has been involved in a number of transactions in Mississippi and managed probably $2 billion for various municipalities. We never had really a transaction other than this transaction at Okolona that did not meet the public validation process.”
But Selectman Danny Esch said the answers at the work session didn’t satisfy his concerns, asking why the cost of the project still isn’t available in anything more definite than projections.
“Nothing has changed,” Esch said.
“I still want them to answer the question, ‘How can I trust them with $28 million or $30 million when in another county they didn’t even finish the job at $1.8 million?’ If someone can answer that question for me: ‘How can I trust these people?’ … I can’t trust them.”
Selectman David Myers, meanwhile, would have been happy just to see the request come in at the $30 million level.
“We were told that we could build this for the future at the top estimate being $30 million, so why are we looking to give you the authority to borrow $40 million?” asked Myers.
“I’m just not comfortable with the moving target,” he said later.
Bingham said that figure didn’t mean the project would cost $40 million, but that authorizing that amount would prevent the city from having to go through another bonding process with accompanying fees if unexpected issues forced the project over its estimated cost.
Approval to borrow that amount was similar to someone getting approval on a car loan in that the actual cost of the car would not be for the full amount, Bingham said.
Patterson has previously said that the board had chances both in January and last year to question the Malachi Group about its role when Bingham appeared before the board at those times, and stated the costs would be competitive with similar companies.
He has urged the board to remember a July 31 deadline to get the project off the ground and avoid fines from the state Department of Environmental Quality.
The wastewater treatment facility’s construction is on a court-ordered timeline after the city agreed to built the facility as part of settlement of a lawsuit alleging the city’s aging system was contaminating the environment.
Patterson reiterated Tuesday that he had brought the team together with an eye toward making the project as financially painless as possible for the city.
He praised the board’s approval of a rate increase on water and sewer service last year that advisors said will cover all but $200,000-$400,000 of annual payments on a 20-year bond, and said he’d brought in lawyer Larry Harris as part of the team in order to make officials comfortable with someone they had worked with before.
“I have done several bond issues with these gentlemen, and everything went as planned,” Harris said, referring to Bingham and lawyer Tony Gaylor.
Patterson said the city had put itself in position to complete a previously daunting task.
