The City of Mt. Juliet borrowed $10,000,000 on February 26, 2008 in the municipal bond market. Prior to the borrowing, the City had $7.2 million in general obligation debt. AFTER the borrowing, the city owes $17.2 million to bond-holders. So, in one day, the City increased its debt by 138%.
The purpose of the bonds (and the uses to which the proceeds are restricted) are to construct roads and an animal shelter (and pay for any land as well as any related architectural, engineering, legal, fiscal and administrative costs). You can read the summary statement here.
There’s a very nice online database called the Electronic Municipal Market Access that tracks municipal debt. The online database also includes a .pdf of the full 128-page Official Statement filed with the bond offering. Mt. Juliet’s Official Statement includes the full audit of the City finances done as of June 30, 2007.
The Official Statement filed by the City has a couple of howlers in it. The minor one is the continued assertion that Mt. Juliet is the fastest-growing city in the state of Tennessee. That’s demonstrably not true, as both LaVergne and Spring Hill have been growing faster over the past 5, 10, and 20 years. More serious is a mis-representation of the City’s audited fund balances on page B-13 (pdf page 48). The table filed by the City seems to indicate that the City’s Sewer Fund had a fund balance of $20 million in 2004, $23.3 million in 2005, $27.5 million in 2006, and $30.5 million in 2007. These numbers are wrong. The sewer fund had a fund balance of about $6.0 million on June 30, 2007 (see appendix C, pdf page 70). Whoever compiled the Fund Balances on page B-13 mistakenly picked up the Net Assets of the Sewer Fund rather than the Fund Balance (compare the numbers at the bottom of pdf page 66). Net Assets includes the value of all the pipe buried in the ground. It’s not readily available to pay future bond obligations. Overstating the amount of cash the City has on hand by a factor of five may very well be a material mis-statement of the City’s financial position. Cash on hand is certainly one of the key figures a potential bond purchaser might examine. If the City mis-stated a key financial fact, the bond issue may be void. Bond purchasers could conceivably charge fraud.
That’s the serious mistake, but there’s another mistake that’s just as troubling and demonstrates that the City (like Val Kilmer in Tombstone) has a “hypocrisy that knows no bounds.”
One of the pages of the City’s Official Statement includes a calculation of the per capita indebtedness of the City both before and after the new bond issue. Its page 45 of the pdf. The table there displays a line for the City’s population over six years, from 2003 to 2008. Here are the numbers:
2003 – 16,520
2004 – 17,274
2005 – 18,099
2006 – 16,520
2007 – 17,274
2008 – 18,099
Now given that the City had a certified special census done in 2006 that showed a population of 20,392, these numbers seem improbable. [heh]
We also know from the City’s fabricated explanation for the firing of City Planner Bobby Franklin in July of 2007, that they consider a mistake in reporting the City’s population numbers on a state grant application to be a firing offense. What should the penalty be for getting them wrong on an Official Statement for a $10,000,000Bond Offering?
On page 19 of the Official Statement, we find this:
CERTIFICATION OF ISSUER
On behalf of the City, we hereby certify that to the best of our knowledge and belief, the information contained herein as of this date is true and correct.
/s/ Linda C. Elam
/s/ Sheila Luckett
Here’s a link to an annotated copy of the Official Statement – MJ 2008 Bond Issue.