In a special meeting this afternoon city council approved a resolution to move forward with talks with Bank of America-Merrill Lynch on the $21.5 million Music and Entertainment District Special Revenue bonds issued in 2007 to finance the construction, the operation and to provide operating capital for the theater off Interstate 95.
The city currently owes $15.5 million on the building, Finance Director Leigh Etheridge told council.
Councilman Wayne Smith made the motion to approve the resolution for the city to enter the negotiations.
Part of the resolution reads while the city has met its payment obligations to Bank of America, the loan, which has many terms and conditions, and general economic conditions “have caused uncertainty with the city’s budget. The mayor and city council recognizes the importance of keeping the city on a solid financial basis and have made a decision to undertake the restructuring of the aforesaid loan.”
The resolution notes Bank of America has indicated a willingness to renegotiate certain terms and conditions of the debt.
The events leading to the upcoming formal discussions come after several informal discussions which have included Bank of America-Merrill Lynch, the state Local Government Commission and Davenport and Company, which has served as the city’s financial adviser on the theater debt and bond package, City Manager Joseph Scherer said following the meeting.
Scherer declined to say how much the city could possibly save if the refinancing is approved as the formal discussions have not begun. “We hope to obtain significant financial savings.”
Smith, who in past city council meetings has often led discussions on how to address the theater debt, said afterward, “I’m very happy the city manager and city attorney have finally entered into negotiations.”
Asked about the potential savings to the city if the deal is accepted, Smith would only say, “I think we’ll be a whole lot better off. I am very happy with what the savings are going to be.”
One of the goals of the negotiations is to do away with what has been termed in the past as an often confusing financial package which led to the construction of the venue. “Our intent in these negotiations is to help stabilize our annual budget through trying to obtain a fixed rate loan with terms that help with our cash flow situation,” Scherer said in a press release distributed following the meeting. “Currently, the variable interest rate on a portion of our debt gives us concern for our payments increasing as interest rates may rise in the near future.
“Also, the numerous fees associated with the financial transactions connected with the current bond package make it difficult for the city to accumulate sufficient funds for needed equipment purchases and infrastructure repairs.”
The negotiations, he said in the statement, will focus on “several options with Bank of America-Merrill Lynch that we feel will help improve our financial picture and possibly obtain not only some long-term savings, but will help with our annual budget revenue projections.”
As the city prepares to enter the negotiations, City Attorney Gilbert Chichester said council is also continuing to try to sell the venue. “We’re getting ready to sign a new contract with a new company to market the theater. Marketing the theater will be one of the main points as we continue.”