Published 11/18/2008 By Matthew Lane
KINGSPORT — The city of Kingsport is gearing up to go to the bond market in the coming months — three bond issuances totaling $34.7 million for a series of projects including expansions at the V.O. Dobbins Community Center and the MeadowView Conference Resort and Convention Center.
The three bond issuances in the works are as follows:
•$7.15 million for the renovation and expansion of V.O. Dobbins. The $9 million project calls for demolishing 13,600 square feet of the existing building, renovating the remaining 46,000 square feet, and adding approximately 50,000 square feet of space — 27,910 of which will be a new nonprofit center. Kingsport is looking to bid the project in February.
•$12.3 million for a variety of capital improvement projects including $5 million for several local road projects, $3.8 million for a downtown parking garage, and $1.1 million for Kingsport City Schools.
•$15.3 million for an expansion at the MeadowView conference center, including a 30,000-square-foot executive conference wing at the rear of the facility estimated at $13.9 million.
The Board of Mayor and Aldermen authorized the three bond issuances during its regular meeting Tuesday night. The plan thus far has been for the BMA to move forward with the procedural steps toward doing the bond issuances (the two resolutions and preparing various documents) and then wait until the most appropriate time to offer the bonds to the investment community.
City Manager John Campbell said the earliest the city could go to the bond market would be the second week of December, then the bond market opens back up in January. Campbell said he is hopeful to not go past February.
“We could wait a couple of months on most of it,” Campbell said. “It’s always good to bid early in the spring. Listening to the local contractors, they’re hungry now, and we would get some good competition for those (projects).”
Interest rates for similar bonds are now at 4.6 percent; a similar bond issuance Kingsport did earlier this year was at 4.2 percent.
“We’ll try to get the best rate, but at the same time I’m not going to get too worried about 20 to 30 basis points,” Campbell said, adding all three bond issuances would be for 20 years. “Because you don’t see much variance in the yield curve for 15- and 20-year bonds.”
“By doing these actions, we minimize a tax increase in the future,” Campbell said.
The $12.3 million bond issuance was approved unanimously, but Alderman Pat Shull opposed the other two bond issuances — V.O. Dobbins and MeadowView.
ALDERMAN PAT SHULL OPPOSES FUNDING TO RENOVATE V.O. DOBBINS/OLD DOUGLASS SCHOOL
Shull said the original plan for V.O. Dobbins was very reasonable, but over time the project morphed into something bigger and that the city would be competing with the private sector over the housing of nonprofit organizations.
As for the MeadowView bond issuance, Shull said the project would be better suited for the private sector. Eastman owns the hotel side of MeadowView, while Kingsport owns the convention center side.
“The payoff is highly speculative, and it favors special interests,” Shull said, again suggesting the regional sales tax should be used to reduce property taxes in Kingsport.
Vice Mayor Ben Mallicote said this would be a different scenario if Kingsport’s property tax rate were through the roof and out of line with its sister cities.
“If you look at the total property tax burden, we are right between Bristol and Johnson City, and compared to Oak Ridge we’re 11 percent below them. The idea that we have levied an exorbitant tax rate on the citizens is totally unsupported in fact,” Mallicote said. “I have heard over and over again that we’re giving this money to special interests. Who are the special interests? Name a name. You owe it to this board to tell us whose bidding we’re doing.”
Mayor Dennis Phillips chimed in and asked Shull if it was not a lengthy list, he would like to know.
Shull gave examples of special interests as when the city chose to partner with the YMCA on the aquatic center and the various tax breaks the city has given over recent years, including Food City, Somera Capital (the new owners of the Kingsport Town Center) and Eastman Chemical Co.
Shull added he was not proud of the fact Food City threatened Kingsport and Sullivan County to shut down if they didn’t get what they wanted.
Mallicote said when Sam’s Club left the BMA criticized the company for not letting the city know, but when a business comes to the city beforehand the board calls it extortion.
“You just can’t build something and leave it … and not do something,” Phillips said. “We have some obligation to modernize and update (MeadowView), and 10 years from now hopefully some board will be sitting here looking at another major expansion.”
Tuesday’s votes simply start the process of the city going to the bond market. The BMA will have to approve the sale of the bonds at a later date.
The $12.3 million bond issuance would cover the cost of the projects for the next fiscal year; $23 million more is needed through fiscal year 2013 to fully cover the cost of the projects.
Campbell said the city would have a “pretty good” sized bond issuance next fiscal year, probably in the $10 million to $12 million range, but for the three years afterward the bond issuances would be in the $5 million to $7 million range to fully fund those projects.
The $7.15 million bond issuance for the V.O. Dobbins project is the only bond issuance slated for that project. The $15.3 million bond issuance for the MeadowView project would be paid back using revenues from the regional sales tax — the quarter-cent added to the sales tax rate in 1992 to pay for the construction of the facility.
One other project that has been discussed, but not receiving a bond issuance at this time, is the $12.6 million aquatic center. Campbell said the city would likely go to the bond market for this project in the spring or early summer.
“We’re in the stage of trying to choose a design team, and we’re at least a month before our recommendation for the design team,” Campbell said. “The earliest we could get ready for the bidding process would be May or June. If we had nothing happen to the bond market and knew we could get great rates now, it might have made sense to fund it.”
As of June 30, Kingsport’s general fund debt was $80.7 million, with total debt standing at $156 million — a 20 percent increase from the $129.6 million total debt level in fiscal year 2007. By June 30, 2009, Kingsport’s finance records show $13.5 million in debt rolling off.
With $34.7 million in debt being added and $13.5 million coming off, Kingsport’s general fund debt would be $93.1 million, while total debt would be $177.2 million at the end of the 2009 fiscal year.
In other business Tuesday night the BMA:
•Appropriated $248,000 to Kingsport Tomorrow to cover the shortfall in the Veterans Memorial project. The memorial is located in front of J. Fred Johnson Park on Fort Henry Drive.
•Approved a lease agreement for Quebecor World Inc. to lease office and storage space in the old Quebecor facility on Roller Street. Quebecor donated the facility to the city last year but kept office and storage space there for the past year. The lease would be for three years and be $54,742 a year.
