TCI Realty of Dallas, a prospective partner with the City of Jackson on a convention center hotel, is racing the clock to gain a $70.1 million share of Mississippi’s tax-exempt Gulf Opportunity Zone bonds before they expire Dec. 31.
Meanwhile, the nearly $100 million project faces a council increasingly skeptical about inheriting a development partner from a previous mayoral administration and pledging city tax dollars to backstop the deal.
The Mississippi Development Authority and Gov. Haley Barbour are reviewing applications for more than $350 million in Go-Zone bonds. The application for the $70.1 million is the only one still out, said Kathy Gelston, CFO of the MDA, the agency that has administered the bonds since Congress created them as part of the Katrina recovery effort.
Citing confidentiality rules, Gelston would not say whether TCI Realty is the entity with the yet-to-be completed application. The city’s financial adviser on the hotel project, Porter Bingham of Malachi Financial in Atlanta, said the outstanding application belongs to TCI. “I can’t say it’s been submitted, but they are definitely in the process of getting the application in,” said Bingham, who has worked with the city and Jackson Redevelopment Agency on the project for two years.
“A lot of wood has been chopped,” he said of efforts to get the 16-floor, 309-room convention headquarters hotel built.
Mayor Harvey Johnson and other supporters of the project see it as critical to the success of the 3-year-old Convention Complex. Johnson and TCI. Johnson and TCI got the go-ahead from the City Council to pursue the Go-zone allocation several weeks ago.
They must return to the council for approval to sell the bonds, an outcome that is not assured, considering city taxpayers are to serve as co-signers on the $96 million in hotel debt. “I and a majority of my colleagues have grave concerns about this deal,“ said Councilman Quentin Whitwell, a Republican and Ward 1 representative, in an interview last Wednesday.
Supporters insist demand for rooms will be sufficient to cover the debt, which is to be split evenly between the city and TCI Realty. They cite a market feasibility study done on behalf of TCI by PKF Consulting.
A lot of work is ahead for TCI. First, it must get the application completed and returned to the MDA for reviews by the agency and governor’s office, said Gelston.
While the hotel deal called for a $96 million, only $70.1 million remained when the MDA received the application request. “We’ve issued four or five applications since spring,” she said.
The holder of the final application must move quickly and make everything fall in place, according to Gelston.
First, Gelston said, it is going to need a “tremendous relationship” with a financial company” and have its due diligence completed.
“We’re still hopeful” the application will arrive in time, said Gelston, who noted the tax-free bonds are an economic development tool and the MDA does not want to return the allocation unused.
For the hotel project, according to Malachi Financial’s Bingham, the Go-Zone bonds are desired more for the efficiency they can bring to the financing process than for their tax-free interest.
The plan is to transfer them to the Jackson Redevelopment Agency which, in turn, will convert them to Urban Renewal Bonds, Bingham said.
But first the City Council must give its blessing. Johnson conceded in a recent interview he will hand the council a deal that is not his first preference.
Such public-private partnerships are typically done with the public entity owning the land and giving a long-term lease to the developer. In this instance, the developer owns 5 acres between Pascagoula and Pearl streets and stands to gain $14.3 million by selling back 3.4 acres to the city on which to put the convention hotel, as well as eventually a limited service hotel and mixed-use development.
The city had sold the parcels to TCI in an earlier bid to create a partnership for a convention hotel. Getting the land puts the deal back into a more traditional form, said Johnson, who added: “I would not have crafted it the way it is now.”
The deal is pricey but provides an insurance policy against the 300,000-square-foot Convention Complex withering and the area surrounding it decaying. “If that area down there remains vacant, pretty soon we are going to start losing convention business there,” Johnson said. “So I’m comfortable we’re moving in the right direction.”
Ward 1’s Whitwell is not sharing Johnson’s comfort, at least at the moment. At this point, he said he is unwilling to name TCI as the city’s partner and wants to open the process up to other interested developers.
“My position is we need to bid this out,” he said.
Whether he can support the project itself is uncertain, Whitwell said, and noted his district pays “50 percent“ of the city‘s taxes.
“They aren’t interested in buying a hotel right now,” he said.
Tony Yarber, a Democrat and Ward 6 representative, indicated support for the hotel for its potential to keep the Convention Complex financially viable. But he, too, has some qualms about designating a partner from the administration of the late Mayor Frank Melton, Yarber said Wednesday.
“I’m with Quentin (Whitwell) to the degree that I would love to see who else is out there that would possibly be willing to bite.”