The state comptroller has 'concerns,' as Memphis considers backing 100% of One Beale debt

The city of Memphis' chief financial officer told the Memphis City Council Tuesday that State Comptroller Jason Mumpower has 'concerns' about the city backstopping 100% of the bonds that will be issued for the One Beale development.

The city's CFO Shirley Ford said the city administration shared the proposal to back 100% of the debt with Mumpower Monday and he expressed trepidation. A spokesman for the comptroller later confirmed the conversation.

Shirley Ford also said the city had not reviewed an accounting firm's calculations as to why the city needed to back 100% of the debt — it had agreed to back 50% this spring. Ford expressed further worry about what agreeing to backstop 100% of the debt would do to the city's bond ratings and mean for its long-term balance sheet.

The city's investment would back bonds on the One Beale project so the developer Chance Carlisle, the brother of Councilman Chase Carlisle, can build a 350-plus Grand Hyatt hotel. The city administration has long argued that such a hotel is needed to serve the Renasant Convention Center, which just received $200-plus million in renovations.

Chance Carlisle said Tuesday the project was in danger without a 100% backstop and to save it without the city's help the development team would have to dilute minority ownership stakes.

The city would only be on the hook for the debt if the hotel's revenues and special taxes that it would charge on rooms and restaurant meals fall short of paying off the debt issued to finance the project.

Council runs hurry-up

Ford's admission about the conversation with Mumpower illustrated a disagreement between a faction of the Memphis City Council and Memphis Mayor Jim Strickland's administration.

It appeared the Strickland administration was not quite ready to back all of the debt. But seven members of the City Council are sponsoring a resolution to up the city's backstop of the debt reserve fund to 100%.

The sponsors — Councilmen JB Smiley, Jr., Jeff Warren, Worth Morgan, Edmund Ford Sr., J. Ford Canale and Councilwomen Cheyenne Johnson and Patrice Robinson — put a resolution to back all of the debt on the City Council's agenda ahead of the Strickland administration agreeing to it. The resolution is scheduled for a vote Tuesday for same-night minutes, meaning the decision would be made and final Tuesday.

Ford's concerns about the finances appeared to feel on largely deaf ears. Morgan and Warren questioned Tuesday why the administration would need more than a few hours to review increasing the city's long-term liabilities by tens of millions of dollars.

"Is there a way that we can do it without a 100% backstop?... Let us know by executive session," Warren said to Ford Tuesday morning.

The procedural kerfuffle raises questions about what has happened behind the scenes. The Strickland administration shepherded the project through the approval process this spring in close coordination with the development team.

Developer, administration meet behind closed doors

After the council's economic development committee meeting Tuesday morning, Chance Carlisle, Shirley Ford and city chief operating officer Doug McGowen among others went upstairs at Memphis City Hall.

The group met for about an hour. After the meeting, Chance Carlisle said the meeting between his team and the administration was "great."

"We've got a couple of questions that we need to answer for the administration and vice versa. We are all rolling in the same direction. And I have full confidence that we'll figure out a path forward," Chance Carlisle said.

According to a source close to the matter, the vote on the One Beale debt is expected to be delayed Tuesday and then voted on during a special council meeting later this week.

Spokesman: Comptroller questioned timing of project

John Dunn, a spokesman for Mumpower, said the comptroller, Shirley Ford and McGowen spoke Monday.

"He certainly expressed that he had concerns," Dunn said. "He also told them perhaps it was time to consider whether this was the right time for this."

Samuel Hardiman covers Memphis city government and politics for The Commercial Appeal. He can be reached by email at samuel.hardiman@commercialappeal.com or followed on Twitter at @samhardiman. 

This article originally appeared on Memphis Commercial Appeal: Comptroller concerned about Memphis' plans to back One Beale debt