No WhiteWash!

There were three bonds that were voted on at the November 18, 2008 Kingsport, Tennessee Board of Mayor and Alderman. A total of $34,753,000 was voted on and passed.

This was an “Initial” resolution, which means the city staff is authorized to go into the bond market to make a deal subject to BMA final approval.

The three bonds are as follows.

The items in green in the table below gives the details for the General Improvement Bond ($12,305,000) and it would have been nice if the items in the General Improvement Bond were listed separately. Politics, I am sure has something to do with it, because of the way it is listed. For example, if a BMA member had a strong desire against one of the items below in green, but was for the balance of the items, then it may force the BMA member to vote for something he/she was against to get the good items.

I have written many posts concerning the MeadowView Convention Center Expansion. This expansion of the convention center in my view, caters to the special interests. The current convention center has not made money and the taxpayers are keeping it afloat. Johnson City, Tennessee Millennium Centre has not made money since it was built in 1999. I do believe that the City Manager of Johnson City was John Campbell when it was planned and built. Now, John Campbell, who is now the City Manager for Kingsport wants to do it here.

On the V.O. Dobbins Center, Alderman Marsh and Shull voted against this project, because it had grown into something bigger than in the earlier discussions. Both, Marsh and Shull expressed concerns that the city was getting into the business of competing with the private sector.

Alderman Marsh stated that the City of Kingsport is attacking its own taxpayers by competing with businesses that has rental property that rent to nonprofits. The city is looking to have as renters, non-profits that are renting elsewhere in the city. For example, if the city is successful, United Way would leave the downtown area to relocate to the V.O.Dobbins Center and thus steal customers away from the private sector.

With the final approval of the three bonds below, the total debt would be $190.7 million and this does not include the aquatic center. Alderman Marsh has stated that the debt could go as high as $250 million in the next few years.

If you have a concern about this debt or the items below, then voice your concern to the BMA members. You can express your concerns by going to the meetings, write letters to the editor, talk to them on the telephone, leave a comment on this blog

The November 18, 2008 business meeting of the Kingsport, Tennessee Board of Mayor and Aldermen was a very lively heated debate concerning the MeadowView Convention Center expansion.

I saw political spin in action with the City of Kingsport attempting to justify the convention center expansion and using the Regional Sales Tax to fund it.  There was an attempt to explain how great things are going in Kingsport.  If Kingsport is doing all that great economically, then why not return the regional sales tax to the taxpayers

Vice Mayor Mallicote went on the attack with Mayor Phillips also jumping into the fray over remarks made by Alderman Shull.  Everyone on the BMA should be able to state their views without being attacked.

Vice Mayor Mallicote stated that he had researched and had found many newspaper articles concerning the MeadowView expansion and it was not be something that was kept from the public.  The problem that this BMA had was the cocky attitude displayed. There was a brief discussion on the economics of the expansion and there was a rush to railroad a vote on it the next night without public input.  It was like we have the votes and we don’t care what you think.  Alderman Marsh and Alderman Shull both attempted to delay the vote so the public could have input, but were voted down.

City Manager, John Campbell went over some numbers which no one could really see attempting to justify.  He even stated that 60% of the sales tax comes from people from out of town.  What he was saying was the citizens are really only out 40% as if that is going to make the citizens feel better.  How does he know if the sales tax comes from out of town?

Campbell also presented numbers that ranked tourism in the top counties.  By doing this he was riding on the coattails from Sullivan County tourists.  The number two tourist attraction in the state is the Bristol race held two times a year.

Campbell talked about the $85 million property tax values in the MeadowView area and then Phillips stated that they get $80 million in property taxes per year.  They can’t even get their facts the same.  $85 million appraised property value would give you $782,000 in property tax.  Currently the city gets $106,110 in property tax from the MeadowView hotel.

The additional property values should have no value in determining to expand the convention center.  When I visit my doctor in the Meadowview area, I do not stay at the MeadowView Resort and Convention Center at prices that start at $159.00 per night.  In addition, if I wanted to go to Eastman Credit Union, get my hearing checked, get a cup of coffee, get my teeth worked on, have plastic surgery, go to the Social Security office, etc., I don’t have a need for the MeadowView Resort and Convention Center.

It is apparent that the city leaders are attempting to ride on the coattails of the surrounding businesses to justify the MeadowView Convention Center Expansion.

I am sure that the surrounding businesses do not need to ride on the coattails of MeadowView Resort and Convention Center.  They would do just fine if there were no MeadowView Resort and Convention Center.

Mayor Phillips made a statement that unemployment in Kingsport was 6 percent.  I don’t know where the mayor gets his numbers, but the unemployment for Kingsport for the month of September was 7.7 percent using State numbers.

The bottom line to all of this folks is, you have kissed your regional sale tax goodbye.  You will not be getting it from the “gang of five”.  Maybe after the 2009 election things might change. Mayor Phillips was able to get his special parking lot that now is close to the restaurant at the Meadowview hotel.  Now he won’t have to walk so far to eat.

Listed below are past Kingsport Time-News articles relating to the MeadowView area.  When one looks at the articles, it is easy to see that Mayor Dennis Phillips had no intention of giving back the 1/4 percent Regional Sales Tax back to the taxpayers.  I think you will see that Alderman Marsh and Shull have been trying to discuss for some time the regional sales tax issue.  It was also interesting to see Alderman Munsey role in the early stages in the MeadowView issue.  Also, it my view, there is linkage between the aquatic center and the convention center.

It is indeed a sad day for the citizens of Kingsport!

BMA OKs $34.7 million in bonds to fund community projects

Marsh urges scuttling MeadowView expansion

Kingsport BMA hires architect for expansion at MeadowView

Convention center anchors booming development in Meadowview area

Kingsport readies for next step in aquatic center process

Kingsport BMA votes to put aquatic center at Meadowview, co-locate with YMCA

Divided BMA set to vote on site for aquatic center Wednesday night

Panel backs Meadowview for aquatic center site

Kingsport leaders plan bond issue for capital improvements

Committee close to vote on Kingsport aquatic center site

Aquatic center study supports Meadowview site

Kingsport BMA gets first look at $14 million MeadowView expansion

MeadowView breaks ground on $15 million expansion project

Mayor appoints panel to study sites for Kingsport aquatics center

Kingsport considering aquatics center sites

Two Kingsport hotel projects in the works

Kingsport BMA to consider reinvestment in MeadowView

Kingsport mayor urges look at MeadowView improvements

Kingsport leaders praise investment in MeadowView

Kingsport’s MeadowView Convention Center announces expansion: two new towers, 110 rooms

Kingsport BMA hears options for aquatics center

Kingsport may partner with YMCA on aquatics center

Kingsport alderman wants $800,000 in interest tacked onto MeadowView debt

Kingsport mayor believes higher ed center best use of ‘MeadowView tax’

Kingsport mayor hopes to use MeadowView tax to fund higher ed center

Shull suggests using sales tax to pay off debt

Marsh: Voters should decide whether to reallocate funds for higher ed center

See all posts on MeadowView

The citizens of Kingsport, Tennessee need to be aware of the decision by the Kingsport, Tennessee Board of Mayor and Alderman to use the taxpayers money to build an executive conference wing onto the City of Kingsport MeadowView Convention Center. The Board of Mayor and Alderman railroaded this to a vote at the September 15, 2008 BMA meeting without public input. It is estimated that the expansion will cost $14 to $15 million dollars.

Alderman Shull and Marsh voted against the expansion, while Mayor Phillips, Vice Mayor Ben Mallicote, and Aldermen Valerie Joh, Larry Munsey, Jantry Shupe voted to proceed with the expansion. See More hissy fits in Kingsport, Tennessee Board of Mayor and Aldermen.

BMA members below that voted for the expansion at MeadowView Convention Center (gang of five))

Mayor Dennis Phillips	Vice Mayor Ben Mallicote	Alderman Larry Munsey	Alderman Valerie Joh	Alderman Jantry Shupe

I am very passionate about this expansion and feel it is the worst decision the Kingsport BMA has made lately.

First of all, I do know a thing or two about hotels, meeting facilities, conventions, and trade shows. I have literately stayed at many thousand overnight stays at hotels and have participated in setting up meetings, conventions and trade shows across the Untied States. I have worked with events planners from major corporations to set up meetings. I have also worked with major corporate hotel owners to help them promote their hotels and conventions facilities in many cities.

The current MeadowView Convention Center was paid for using the sales tax that voters voted on some years ago. However, the convention center debt is paid up, but the City of Kingsport is still pouring money into it because it is not a profit maker.

Now the city wants to expand it and build a plush executive type facility that could cost up to $15 million dollars. The risk is upon the citizens of Kingsport who as taxpayers will be footing the bill. The city is proposing to pay for the expansion out of the regional quarter cent sales tax rate that the voters approved in 1992 for the construction of the original convention center.

If this expansion is such a great idea, then why not share with the citizens of Kingsport the business case or economic justification for the expansion.

It appears that this expansion will cater to the special interests of firms/people who desire this expansion, but are not at risk, because it is not their money. The incestuous relationship by Mayor Dennis Phillips, Vice Mayor Mallicote, and Aldermen Munsey, Joh, Shupe with special interests groups should be of concern to the citizens of Kingsport.

With the glut of similar available facilities that Kingsport wants to build, it is beyond me how Kingsport can justify this expansion.

Kingsport, Tennessee is not the easy to get to if traveling by airplane. Companies look at how long it takes to travel to a convention site. The small size of the TriCities airport and the available airlines servicing it makes it undesirable. Flying into Knoxville is better, but again the available flights are limited and the Knoxville airport is two hours away.

Companies also look at the attractions that the convention site area has to offer. Kingsport does not have the attractions that are needed for diverse convention attendees. Sorry Kingsport, golf does not appeal to everyone. Also, the smell from Eastman makes undesirable for out of town people.

Companies will ask for deep discounts on hotel rooms or convention facilities. Will Eastman Chemical Company, the owner of the hotel give the discount or will the taxpayers absorb the discount for the it’s convention facility use?

I would propose that Kingsport sell the current convention facility to Eastman. It appears that they benefit the most from the convention facility. The Kingsport Chamber Of Commerce operates Kingsport Convention and Visitors Bureau and their members also will benefit. If there are others that feel that the expansion of the convention center is needed, then let them build it with their money.

Kingsport have stated that they have talked to companies about this type of executive conference center. What Kingsport needs to do is ask for advice from the CEO’s of companies they have talked to. Tell the companies that about twelve years ago, the City of Kingsport invested $19.5 million dollars to build the Meadowview Conference Center, but the conference has not been a money maker and the city has to put money in to keep it going. Tell them that Kingsport is going to make it better/bigger and put up to $15 million dollars into a expansion. Also, tell them that the city owns the adjoining Cattails golf course, that cost $6.2 million dollars and is not a money maker. Tell them that the convention center helps line the pockets of Eastman by driving sales to the Eastman hotel next door. Based on the above, ask them if they would invest in the expansion considering the competition in the convention business and the glut of conventions centers. If they say that they would invest, then ask if they would build it.

If building a new convention center in Kingsport is such a wonderful way to make money for our community, why isn’t some wealthy business person or company telling the city, “I’ll build the convention center and let you use it (at a cost of course).”

Since this is such a brilliant idea, don’t you think that some venture capitalist would seize upon the opportunity and run with it?

The simple answer is it’s not worth the risk.

Venture capitalists are in the risk/reward business. The bigger the risk, the bigger the reward. But successful venture capitalists weigh the risk before they make an investment, and if the risk is too big they won’t do the deal. It seems to me that the lack of any real business people putting their own money into this project is a clear indication that the risk is not worth the reward.

With all of the down-side associated with this project, no business person in their right mind would put their own money into this thing. So why in the world are our elected officials willing to do this project?

The simple answer is that it’s not their money they’re playing with, it’s ours.

And that’s why it’s worth the risk.

Express your views to the BMA if you have a concern with this expansion. Should we have a petition to remove certain BMA members from office? You can leave a comment on this blog, write letters to the local newspapers, tell your friends, go to BMA meetings and express your concerns on TV, etc.

Below is some background information from the Brookings Institution.

Space Available: The Realities of Convention Centers as Economic Development Strategy

Heywood Sanders

The Brookings Institution

To cities the lure of the convention business has long been the prospect of visitors emptying their wallets on meals, lodging, and entertainment, helping to rejuvenate ailing downtowns.

However, an examination of the convention business and city and state spending on host venues finds that:

• The overall convention marketplace is declining in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community, contrary to repeated industry projections. Moreover this decline began prior to the disruptions of 9-11 and is exacerbated by advances in communications technology. Currently, overall attendance at the 200 largest tradeshow events languishes at 1993 levels.
• Nonetheless, localities, sometimes with state assistance, have continued a type of arms race with competing cities to host these events, investing massive amounts of capital in new convention center construction and expansion of existing facilities. Over the past decade alone, public capital spending on convention centers has doubled to $2.4 billion annually, increasing convention space by over 50 percent since 1990. Nationwide, 44 new or expanded convention centers are now in planning or construction.
• Faced with increased competition, many cities spend more money on additional convention amenities, like publicly-financed hotels to serve as convention “headquarters.” Another competitive response has been to offer deep discounts to tradeshow groups. Despite dedicated taxes to pay off the public bonds issued to build convention centers, many—including Washington, D.C and St. Louis—operate at a loss.

This analysis should give local leaders pause as they consider calls for ever more public investment into the convention business, while weighing simultaneously where else scarce public funds could be spent to boost the urban economy.

Actual $107,100,000
During Mayor Dennis Phillips time as mayor, the amount above in new bonds (debt) has been issued . The mayor has a little less than a year left in his current term and there are plans to add more debt such..The Aquatic Center ($15 million) has not been approved and is included in the total below.Actual and Planned $123,100,000

Mayor Dennis Phillips clearly will make history as the Kingsport mayor who spent the most of the taxpayer, children and grandchildren money.

Mayor Phillips may have been a former banker and is used to working with other peoples money. But he should stop to think how the citizens feel about the financial types. I will say that the finance folks have a very unfavorable rating because of what is transpiring with failed banks foreclosures, Lehman Brothers, AIG, Merrill Lynch, etc

Mayor Phillips also had help in acquiring this debt by the Vice Mayor and other Aldermen. Aldermen Marsh and Shull voted the most against new debt.

The City of Kingsport, Tennessee has lost it’s Aaa insured bond credit rating with Moody’s Investors Service. Moody’s Investors Service is among the world’s most respected and widely utilized sources for credit ratings, research and risk analysis.

The reason for the downgrade for the insured bonds below is the credit rating given to MBIA and Ambac, who insure a good part of the City of Kingsport bonds. Moody’s has given a negative outlook rating for these two firms. Having a high insured rating on the bond makes it more attractive to investors.

Moody’s assigns an underlying rating for bonds, which is an assessment of a bond issue’s credit risk, without considering external credit enhancements. For an insured bond issue, the underlying rating is the rating the issue would receive if it had no insurance.

The City of Kingsport, Tennessee municipal bonds are insured against default by a Municipal Bond Insurance company. The company pledges to make all interest and principal payments when due if the issuer of the bonds defaults on its obligations. In return, the bond’s issuer pays a premium to the insurance company. Insured bonds usually trade based on the credit rating of the insurer rather than the rating of the underlying issuer, since the insurance company is ultimately at risk for the repayment of principal and interest. Insured bonds will pay slightly lower yields, because of the cost of the insurance protection, than comparable noninsured bonds. Some of the major municipal bond insurance firms include MBIA and AMBAC Indemnity Corporation.

Moody’s ratings

Aaa - Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.

Aa1, Aa2, Aa3 – Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A1, A2, A3 – Obligations rated A are considered upper-medium grade and are subject to low credit risk.

Baa1, Baa2, Baa3 – Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

In the table below for Kingsport’s current bonds, the ratings are in bold. There are four bonds that Moody’s has labeled as “Possible Downgrade”. The City of Kingsport pay insurance premiums to get a good rating, but looking at the chart below makes one wonder whether Kingsport is getting their money’s worth, For example, the Insured A1, Underlying A1 rating for a bond below are the same for which the city pays to get a higher insured rating. Also, in the table below, the Sale Amt. is in millions

Kingsport, Tennessee Current Bonds

The General Financial Philosophy adopted by the Board of Mayor and Alderman on June 6, 2000 states that general obligation bonds will be issued with maturities of 15 years or less. Lately, it seems that the city has gone for some 20 year bonds. Why the change from 15 years? Is the city having problems paying, because of the total bond debt?

Moody’s stated that Kingsport had $105.56 million debt on May 2008. Adding the new bonds issued in May, 2008 would make the total bond debt $143.88 million. At the rate the city has been spending, it is possible that they will be approaching $200 million in debt.

On June 3, 2008 the Kingsport, Tennessee 2008-2009 budget was discussed and voted on. This was the first reading and the final vote is on June 17, 2008   It appears that the City of Kingsport did not reduce the spending and in fact increased it.  The budget has the usual pet pork spending and they are not going to raise taxes.  But, they have a secret tax for the citizens by raising the sewer rate 2.8 percent for city residents and 8 percent for county.  They will also raise the water rates for the county 3.5 percent.  Last year, they imposed the secret tax and received about $700,000.

Mayor Phillips, Vice Mayor Mallicote, Aldermen Joh, Shupe, Munsey voted for the proposed budget while Aldermen Marsh and Shull voted in opposition.

There was a front page article in the Kingsport Times-News.   It basically said that two aldermen objected to the budget and that there would not be a tax increase.  There was not significant coverage by the local newspaper for an important subject as this, but I am not surprised by the lack of coverage.

Alderman Marsh stated he could not vote in approval for the 2008-2009 budget.  He said the city is spending 2% more, nine more people added and it was business as usual.   He also stated that city employees are receiving 25% (including benefits) more over the last three years.  City Manager, John Campbell said that was not true and it was more like 15%.  Alderman Marsh stated that he was using Campbell numbers.

Alderman Shull read a prepared statement expressing his opposition to the budget.  He did state that the average pay for Kingsport citizens was around $35,000 per year and the city manager with the this budget would be making $200,000. He stated that the city manager’s pay should be capped at $137,000.  More information is needed on the city manager’s pay, but I did find the following the budget information.  “City Manager will receive 2% pay plan increase, The performance bonus and a 2% pay adjustment effective July 1, 2008″

Vice Mayor Mallicote began to discount what Alderman Shull and Alderman Marsh stated.  He said he did not believe all of the doom and gloom and he was more optimistic about the economy in Kingsport.  In my opinion he needs to open his eyes.  He stated that building permits are up when in fact they are down 45%

Alderman Valerie Joh boasted that she knew more about real estate than any one else on the BMA since she is the owner of Blue Ridge Properties, a real estate firm.  She stated that her real estate business is doing great.  That is great that her business is doing great, but what about the foreclosures in the area, gas prices, food prices, plant closings, less sales tax dollars coming in, etc.?

Alderman Shupe did not state his position on the budget, nor did I expect him to.  He almost never speaks up to take a position and usually votes with the majority.  It may be that he is intimidated by the other members of the BMA.  He brought up that Alderman Munsey was a former Treasure at Eastman Chemical and asked what Alderman Munsey comments were on the budget.

Alderman Munsey, with the lead in by Alderman Shupe began to read a letter concerning the A1 bond rating from Moody’s.  He was saying that Kingsport is in good shape to borrow more money based on the A1 rating from Moody’s.  As I understand it Moody’s Investors Service interviewed many people in the City of Kingsport government and I am sure they presented a rosy picture.  But, did anyone tell Moody’s that what Kingsport gave away to get some of this so called growth.  An example would be the $18 million tax break for Eastman Chemical.   Alderman Munsey has stated in the past that  “Debt is neither good or bad,”  Alderman Shull asked Munsey why Kingsport did not have a better bond rating and were there higher ratings?   (Note: Moody’s Aaa, Aa1, Aa2, and Aa3 are higher bond ratings than the A1 Kingsport currently has.  Sullivan County has a Aa3 bond rating.)

Mayor Phillips then stated that he was shutting the debate down.  Too bad, because I really wanted to see if Alderman Shupe had anything to say about the budget.  I was shocked to hear the mayor state that if the taxpayers wanted the city to cut the spending, then they could collect garbage every other week.  With this statement, the mayor is willing to cut services to the citizens, but unwilling to cut spending in other areas.

Based on past votes by members of the BMA, some on the BMA will carry the label as BIG SPENDERS.