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Kingsport to borrow money to replace a $200k roof and finance it for 20 years

October 21st, 2009 No comments

image Last night the Kingsport, Tennessee Board of Mayor and Alderman voted to borrow $41.1 million for various projects.  According to the Kingsport Times-News quote below, the total debt has doubled in the last five years.  I might add that this has occurred during Mayor Dennis Phillips terms as mayor and John Campbell as city manager.

With this bond issuance, Kingsport’s total debt has doubled in the past five years, from $110 million in fiscal year 2006 to $218 million in fiscal year 2010, according to city records. Kingsport’s general fund debt will increase from the current amount of $92.6 million to $103.4 million for fiscal year 2010, while total city debt will go from $173.5 million to slightly more than $218 million.

Read more via Kingsport BMA approves $41.1 M in bonds – Kingsport Times-News Online.

Things must really be in bad shape for the city because they are borrowing $200k to replace a roof on the Renaissance Center and financing it for 20 years.  Borrowing money to replace a roof should be a maintenance item that is planned for and funded from within a yearly budget.

It would not surprise me that Kingsport will be the subject of many discussions by other cities on Kingsport’s management practices or lack thereof. 

Mayor Phillips, when can we expect the property tax increase?

Below is the spending that was approved

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Overhaul in Bond Sales Is to Be Urged in Tennessee

May 1st, 2009 No comments

The Tennessee comptroller plans on Friday to propose a sweeping overhaul of the way the municipal bond market is regulated in the state.

The comptroller, Justin P. Wilson, said Thursday that his recommended changes would prohibit small cities and counties from using sophisticated derivatives, which have crashed, causing interest payments to increase by as much as 500 percent and putting a strain on local governments.

Read more via Overhaul in Bond Sales Is to Be Urged in Tennessee – NYTimes.com.

Kingsport’s Tax, Spend, and Borrow Obsession

April 28th, 2009 1 comment

Kingsport spending on projects in the last four years has set records since Mayor Phillips has been mayor.  I have written many posts in this blog about the spending on pet projects and to some, I am sure that they think I am against progress and just being negative.

The current debt is around $190 million and there are more projects in the works.  A recent review by Standard & Poor’s, a credit rating firm made the following statement below.

The five-year capital improvement program through fiscal 2013 includes planned issuance of additional GO debt of $5 million-$8 million annually, to help fund total general fund projects of $50.8 million.

The City of Kingsport provided Standard and Poor’s information such as financial data so Standard and Poor’s could give Kingsport a credit rating.

Mayor Phillips, what is the above $50.8 million going to be used for? There should be no secrets, and no surprises about future spending.  The city is working on a new CIP (Capital Improvement Plan) and the citizens need to know what additional projects have been added.

The City of Kingsport is paying millions of dollars each year for interest expense on its borrowed money.  Below is a bond for $11,165,000 that will have $5,464,109 interest that will be needed to paid during the life (20 years) of the bond.  The bond below is just one bond and if you add up all of the interest for all borrowed money, this interest becomes a huge number.

I am not against progress.  I am concerned that Kingsport is doing too much in a short period of time and feel that someday in the future that the city will have to raise taxes to meet its obligations.  At the current rate of spending, a tax increase will be coming in the future.  I am sure that it won’t be this year because it is an election year.

It is a sad situation in Kingsport that the city has to borrow money to fund small dollar projects such as road work, etc.  If I want to send my child to college, I start saving money early when the child is young.  I don’t wait when until he is ready to go to college, stick my hand in my pocket and discover that I don’t have the money and then have to go out and borrow it.  My point is that the City of Kingsport needs to do more long range planning and funding of future projects and depend less on borrowed money.

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You can see other Kingsport financial data like the above by going to the following link:  Comprehensive Annual Financial Report for Year Ended June 30,2008.  You can also visit the Kingsport library to see the Kingsport 2008 Financial Report.

Famous Quotes from the Kingsport Board of Mayor and Aldermen

Mayor Dennis Phillips – ‘We need MeadowView to keep from reducing fire, police protection, and reducing trash pick-up to every two weeks.” October 21, 2008

Mayor Dennis Phillips –“We need to annex so we don’t have to raise taxes”  February 5, 2008

Alderman Munsey – “We need to do the MeadowView expansion to keep from raising taxes” September 15, 2008

Alderman Munsey – Debt is neither good or bad,”   June 3, 2008

Vice Mayor Mallicote – “I do not believe all of the doom and gloom about the economy”.  June 3, 2008

Mayor Dennis Phillips – “If the taxpayers wanted the city to cut the spending, then we could collect garbage every other week”  June 3, 2008

Mayor Dennis Phillips – “If there were no money to spend, then you would not need politicians”  October, 2007

Could Municipal Bonds Really Default?

April 26th, 2009 No comments

When Warren Buffett speaks, it’s usually worth paying attention. This time, the Oracle of Omaha is voicing concerns about the ability of some battered local and state governments to pay off their debts. The idea of cities and states facing insolvency is alarming for sure, and Buffett isn’t alone. Moody’s recently assigned a “negative outlook” to the creditworthiness of all the nation’s local governments. The agency has rarely made such a sweeping generalization but said the magnitude of this recession warranted the move. The comments are the latest to have shaken the once-staid world of municipal bond investing.

Traditionally, muni bonds offered lower yields — usually about 20% less — than Treasury bonds, since their income isn’t taxed. But the group was crushed last year, sending prices down and yields up. Now bargain hunters have started to emerge, attracted by yields that are as much as 70 basis points, or 0.7%, more than similar 10-year Treasurys, for example. As a result, the S&P Muni index has climbed 7% this year, compared with the nearly 6% decline in the broader stock market. Read more…

Does Kingsport, TN have risky bond derivatives from Morgan Keegan?

April 9th, 2009 4 comments

Morgan Keegan, an underwriter of municipal bonds has gotten a lot of attention in Tennessee over their investment advice and their risky bond derivatives.

It started with a New York Times article “Firm Acted as Tutor as It Sold Risky Deals to Towns

It appears that the City of Kingsport has been cozy with Morgan Keegan and the question is what is Kingsport’s situation with Morgan Keegan and the risky bond derivatives?   (See business meeting minutes below).

On December 6 1994, Orange County, a prosperous district in California, declared bankruptcy after suffering losses of around $1.6 billion from a wrong-way bet on interest rates in one of its principal investment pools.  This bankruptcy is prominent because of unprecedented losses and because it was caused by a highly leveraged derivatives strategy rather than a shortage of tax revenues and excess spending.

See what others have said about Morgan Keegan in the links below

Morgan Keegan Mess Continued – Unanimous Approval By State

Morgan Keegan Investment Advice Takes TN Towns Down

Importance of Open Govt proven once again

 

Monday, November 17, 2008, 4:30 PM Regular Work Session Minutes

VI.D.6 Consideration of Initial and Detailed Bond Resolutions Authorizing the Issuance of General Public Improvement Bonds (Various Projects including Parking Garage) in an Amount not to Exceed $12,305,000 (AF: 365-2008).

City Recorder Demming explained how these bonds will be implemented, the requirements for each, and indicated they would be bid sometime after the new year.

Mr. Rick Delaney, an investor from Morgan Keegan, was asked to speak to the current, overall bond market. He explained that markets have been upside down, with very little activity, as expected, but have picked up significantly over the last two weeks. He added that interest rates have continued to fall and that passing these proposed resolution is the first step in preparing to move forward as rates improve in the market.

City Manager Campbell forecasted that this is a very favorable bidding time period regarding construction due to a hungry contractor market and material costs coming down.

Mayor Phillips clarified that if the BMA passes these three bond resolutions, it is doing so to be ready to take advantage of a more favorable bond market than the current one and that the bonds would not be sold without the Board’s prior knowledge. City Manager Campbell explained the necessity to advertise the sale date and confirmed Board members would be made aware before the bonds were sold.

In response to an inquiry from Alderman Shull about peculiarities in any of these bond issues, Mr. Delaney responded that the V.O. Dobbins project involves 501(c)(3) nonprofit entities, the bond regarding MeadowView expansion has some tax issues that attorneys are still working on, and the third one involving the parking garage construction may also raise tax issues. City Recorder Demming added that the MeadowView resolution might be “peculiar” in that it is pledging local option tax on that debt.

Alderman Munsey confirmed that the Board would hold additional discussion on the parking garage construction project even if this is approved by BMA tomorrow night. City Manager Campbell stated that further BMA input would be sought on this project regarding design, size, and if the BMA eventually approves downtown TIF (tax increment financing), additional amounts that can be used. Mr. Munsey indicated that he supports all three of these resolutions to allow the City to prepare to take advantage of the bond market and wanted to voice his support at this work session because he will be unable to attend tomorrow night’s regular meeting when the vote is taken.

Alderman Shull reiterated that he believes the V.O. Dobbins project grew beyond what was originally presented which is why he voted against it. Regarding downtown parking issues, he stated that, in earlier discussion, Alderman Marsh had provided some great alternative avenues in lieu of building a parking garage. Alderman Shull mentioned that he had not seen parking studies done from 1970 forward and would like further documentation to confirm the need. City Manager Campbell agreed to provide Board members with updated information. Assistant to the City Manager, Chris McCartt, also shared that discussion had been held with Regions Bank representatives and that possible parking is now tied up in leases. He stated that another avenue explored was possibly demolishing certain City-owned buildings but that action was not supported by the downtown community because of the number that would need to be torn down. The 300 parking spaces a parking garage could provide, right off of Broad Street, would be a huge lift to existing businesses, as well as an incentive for future business recruitment. He will provide Board members with copies of reports recommending the City look at a parking structure.

Tennessee Cities Caught on Downside of Risky Bond Deals

April 8th, 2009 No comments

The municipal bond marketplace was so lightly regulated that in Tennessee Morgan Keegan was able to dominate almost every phase of the business. The firm, which is based in Memphis, sold $2 billion worth of municipal bond derivatives to 38 cities and counties since 2001, according to data compiled by the state comptroller’s office.

After The New York Times made inquiries, the Tennessee comptroller, Justin P. Wilson, ordered a statewide freeze on bond derivatives and a review of the seminar taught by Morgan Keegan and others.

Read more via Small U.S. Towns Caught on Downside of Risky Bond Deals – NYTimes.com.

Kingsport, TN Tax/Bond Protest Petition

March 1st, 2009 4 comments

A lot of us have bitched, complained, etc about things that are happening in the City of Kingsport Government.  The issues of the regional sales tax for Meadowview not being stopped or returned back to the citizens, aquatic center, MeadowView Convention Center Expansion, out of control spending, etc.

I got an email (below) from Ben Cunningham with Tennessee Tax Revolt offering to help us out.  This may be what we need to give us the kick in the rear to get something done and show the elites that its not about them and the special interests groups. The petition can force the issue to a vote by the citizens.

Email

If anyone in Kingsport or thereabouts is interested in starting a petition drive to oppose a general obligation bond issue (or any other reason, sales tax reduction, home rule govt, etc)  I’ll be glad to come to Kingsport (or anywhere else in the State) and help to start a petition drive. ….that’s what we do.

www.TnTaxRevolt.org
Tennessee Tax Revolt, Inc. is an all-volunteer, non-profit, non-partisan, statewide taxpayer advocacy group. We are working to protect the family budget from excessive taxation and for open, accountable government.

Check out our Taxpayer Information Center for the most complete set of informational links to be found in Tennessee:
http://www.tntaxrevolt.org/ttr-resource-page.htm

Also, check out the Ben’s Taxing Tennessee blog

A few suggestions for petitions

  • Funding for the Aquatic Center must be approved by the voters
  • Establish Alderman districts to better represent citizens on issues
  • Abolish the 1/4 cent Regional Sales Tax
  • Voters must approve/disapprove MeadowView Convention Center Expansion

Action Needed: What I need from you are your thoughts?  Do you think it is a good idea?  Would you help in a petition effort?  Can you get others to help get petitions signed?  I need you response quickly.

Click on the email icon below to send your thoughts and comments.   Spread the word about this post and encourage people to respond also via email.

Below are sample citizens petitions from Tennessee Tax Revolt resources page and a few others that I found.

Samples of Citizen Petitions
Giles Cnty Petition to implement a County Financial Management System per Tennesssee Code Annotated 5-21-126
Wheel Tax Petition used in Carroll County
Carter County Petition to Repeal the Local Option Sales Tax
Roane County Petition calling for a referendum on jail construction bonds
Memphis Petition calling for Charter Commission Election
Metro Nashville Let the People Vote on Property Taxes Charter Amendment Petition
Metro Nashville Term Limits Charter Amendment Petition
Anderson County Petition to raise sales tax for County Schools
City of Kingston Mayor and Council Recall Petition
Petition for Ouster of Coopertown Mayor
Writ of Ouster for Coopertown Mayor by District Attorney
Oak Ridge Petition asking for a referendum on Shopping Center Bonds
Petition for Metropolitian Government Sullivan County
Petition to amend the Shelby County Charter to preserve five Constitutional offices
Roane County, TN Bond Protest Petition
Robertson County Bond Protest Petition
Spring Hill Bond Protest Petition
Giles County Charter Petition

Bond Protest Petition

February 26th, 2009 2 comments

Taxing Tennessee blog has a post and petition that may be of interest to the citizens of Kingsport, TN.  Check out the link and also look at the petition.

The Springfield Board of Mayor and Aldermen just decided to put $3 million of NEW DEBT on the backs of Springfield taxpayers. The City does NOT need to be borrowing more money when the economy is in shambles. Under TN Law the citizens of Springfield can force a vote on this new debt but time is short.

Pat Shull seeks re-election as Alderman on Kingsport, TN Board of Mayor and Alderman

January 13th, 2009 No comments


PAT SHULL FOR ALDERMAN

I have decided to seek re-election as an Alderman on the Kingsport Board of Mayor & Aldermen.  Ideally a candidate for this important position must possess certain political qualifications including experience, character, and judgment about politics and the role of government in our lives.

Regarding experience – I have spent the majority of my adult life in public service, with over 26 years of Active Duty Army service, retiring at the rank of Colonel after holding several positions of great leadership responsibility.  I have been an Alderman for over 3 ½ years, and I have also dedicated many hours to community volunteer work.  I am a small business owner and I understand the concerns of small business people, especially in this challenging economic time.  I invested in Kingsport because I believe in Kingsport’s future.  I am a husband and a father of children attending Kingsport city schools.

The public will judge my character and I stand proudly by my record of public service.  Because of my extensive leadership experience and personal qualities, my employer sought me out for the highly responsible position that I now hold in college administration.

I have strong views on the role of our city government in citizens’ daily life based on long-held political principles and philosophy.  I have extensive formal education in local government and first-hand experience in working with citizens on their concerns.  Simply put, I believe in limited and responsible government, free market solutions, and responsiveness to our citizens.  An elected official must have empathy with those whom he serves.  I offer one brief story to illustrate this.  About 2 years ago a lady, whom I had never met, approached me after a meeting and said the following, “Pat Shull, I’ve heard about you.  You are for regular, ordinary people”.

Many will ask me why I am running for re-election.  The answer is simple and straightforward.  Similar to my earlier life as a soldier, I feel a call to duty.  Many, many citizens have asked me to run again and continue to represent important views, like fiscal discipline and less government, which I believe are under-represented on the current BMA.  These citizens want a strong, independent voice attuned to their views, and not captured by special interests.  I hear their concerns and point out that I voted to cut property taxes, and tirelessly advocated fiscal responsibility.

As your Alderman I will continue to work for progress at a rate that we can afford.  I believe that we can have strong schools, world-class infrastructure, and outstanding services while maintaining low taxes and eliminating unnecessary spending.

Finally, my campaign will observe political civility.   I will respect my opponents, the office that I seek, and the public.  I will stress policy differences, point out problems, and offer solutions, and the facts will remain pre-imminent in any debate or discussion.  I’ve held responsible positions in my life and I will continue to act responsibly. I expect others to act likewise.

I will also continue to work hard on your behalf.  Several citizens have told me that now is the time for the city to live within its means – just like they do.  I seek your support in this effort – together we can make a positive difference.   Thank you.

Pat Shull

Additional information on Alderman Shull views are below.  He has filed the 2009 Statement of Disclosure of Interests (ss-8005) with the Tennessee Ethics Commission.

A NEW DIRECTION FOR KINGSPORT

Patrick W. Shull, Alderman, City of Kingsport

There is a growing dissatisfaction among many Kingsport citizens regarding the direction taken by the current administration of our city government.  In a nutshell, the city leadership has gone too far, too fast in spending taxpayer funds in an unfocused effort to be “progressive”, thereby raising municipal debt to dangerous, unprecedented levels.  While some of the actions taken by the Board of Mayor and Alderman (BMA) have been very positive, the cumulative effect of major spending decisions over the last 3 plus years has jeopardized the long-term financial health of the city, caused much of the citizenry to seriously question the wisdom of certain decisions, and distracted the city from addressing several areas of concern.  The purpose of this paper, therefore, is to highlight problem areas and recommend solutions to those problems.

Municipal Debt: As recently as 2006 the City of Kingsport was on target to bring the overall debt down to the $100 million mark.  Since then, however, the debt has soared until it is now projected to exceed $200 million by early 2009.  So far, the city is still under the legal thresholds for municipal debt.  But the looming danger is that the current economic recession that the United States is experiencing will result in a downturn in city revenues via sales tax receipts and state shared taxes.  As of this writing Kingsport’s unemployment is rising, our bond ratings may be downgraded, and we look poised to start experiencing the severe economic problems already being faced by national and state governments.  The massive debt that the BMA has incurred equals a future tax increase.

Solution: The BMA must start prioritizing spending, something that it has refused to do during the current administration.  The next budget should be tailored to begin paying down debt, not continually increasing it.  We should limit the growth of the city workforce to the rate of growth of the city.  And, we simply cannot begin any new major projects unless we identify a method of paying for it which does not increase the current debt level. Further, the main thrust of major capital projects should be improving the infrastructure for the long term benefit of all citizens. This will require the ability to distinguish between “needs” vs. “wants”.  Finally, the BMA must resist the temptation to raise taxes, the exact wrong thing to do in the middle of a recession.

Annexation: The city has established a pattern of annexing “targets of opportunity”.  Annexation is important to the long-term growth of the city, but it needs to proceed in a reasonable, planned pace.  The major costs of annexation are heavily weighted on the front end and borne by the current city taxpayers – not the annexed areas.

Solution: Kingsport needs a 360 degree comprehensive annexation plan.  Because the Regional Planning Commission is an arm of the city, we have the obligation to plan annexation in a careful, rational manner, which considers the concerns of all the stakeholders including the county government and citizens within the urban growth boundary.  Simply jumping around as we are now only serves to unduly alienate our county constituencies and incur unnecessary un-programmed expense.

Economic Development: This term is probably the most imprecise term in the BMA lexicon.  Because it lacks definition, the current administration has justified a number of questionable actions by citing them as good for economic development.  The public has grown weary of targeted tax breaks and fancy projects aimed at pleasing narrow constituencies.  Our citizens take a dim view regarding the millions of dollars spent on projects while at the same time they are running over pot-holes in our streets.

Solution: The next administration must reach an understanding among the BMA members and our citizens about the proper role of the city government in the local economy.  Traditionally the most productive role the city can play is to help create a climate where the private sector can thrive by: providing superb schools; world-class infrastructure: outstanding public safety; low taxes; excellent public services; and assurance that all citizens will be treated fairly by their government.

School Support: Sullivan County has over capacity in its school system while simultaneously experiencing a decline in school age population.  Conversely, the City of Kingsport is building a new elementary school and is projected to have increases in school age children.  Simply put, this situation is a waste of Sullivan County taxpayer dollars which affects the majority of Kingsporters.  This appears to be a “political” problem beyond the ability of the county and city school boards to solve.

Solution: Kingsport must call for an Education summit between all city/county players.  State law provides ample authority for school districts located in the same county to cooperate in the best interests of the public.  It is certainly within the public interest to resolve this problem and stop wasting money.

City Employee Retirement Costs: The city is one of the few remaining employers with a Defined Benefit Retirement Plan.  This is increasingly becoming unaffordable.  The longer we wait to fix this situation the more expensive resolution will become.

Solution: The city staff must provide a transition plan soon which converts the city to a Defined Contribution system.  At this point there is still a small window of time remaining where this can be done and still keep faith with the current work force regarding their future benefits.

Under-represented Citizenry: There are no Aldermanic districts in Kingsport, all BMA members are elected at large.  As the city population has increased, especially due to growth from recent immigrants, many citizens have become disenchanted with their elected representatives, several whom they view as representing special interests and being “out of touch” with regular, ordinary citizens.

Solution: Kingsport needs four districts with a neighborhood blend of various levels of socio-economic status.  The resulting BMA would have four Aldermen representing districts, and the Mayor and two Aldermen elected at large.  This would provide a better balance of competing interests.

“Distant” Local Government: The majority of the BMA recently passed two controversial measures affecting the Meadowview area despite the majority of Kingsport citizens being opposed.  A strong perception exists among the electorate that the BMA is only concerned with the views of an “elite” and not the majority of citizens, and is unwilling to change.  The current leadership does not hold “town hall” meetings, and often rush resolutions and ordinances through the process before the citizens have had time to “catch-up” with what is occurring.  And the current leadership is not reluctant to wield the enormous power of government in questionable ways.

Solution: New leadership in City Hall is needed to reach out to all citizens.  The BMA needs to seriously consider the views of many, not just a few.  The next BMA needs to be focused on maximizing citizen freedom, not pleasing elite constituencies.

Lack of Leadership Vision: The current administration has never presented a coherent vision of Kingsport’s future which ties various major projects together or prioritizes spending in a logical, considered manner.  Instead the BMA approaches business in an incremental, “one-project-at-a-time” manner. This approach has been a model of adhocracy which renders it impossible for the public, or even other elected officials, to ascertain exactly what we are trying to accomplish.

Solution: The next administration needs to develop and explain a vision of Kingsport’s future which  the public can understand and embrace.  There are several potential contributors to this process which are currently shut out in favor of selected interests.  This vision can be linked to the budget and future planning in a systematic way.

Moody’s Aaa bond rating given to Williamson County, Tennessee

January 13th, 2009 No comments

Apparently, Williamson County, TN is doing something right by getting the highest possible bond rating from Moody’s.  If fact their bond rating is so high, they do not have to pay to have their bonds insured in order to attract investors and get lower interest rates.

It is even more amazing that this county was able to achieve this Aaa rating when the trend is to go the other way due to the economy.

Congratulations Williamson County!

Williamson County’s strong and growing economy is recognized

MOODY’S UPGRADES WILLIAMSON COUNTY TO Aaa FROM Aa1, AFFECTING $461.79 MILLION IN PARITY DEBT  Read more on Williamson County