WLBT 3 - Jackson, MS: 3 On Your Side Investigates: New rate swapping deal on the table in Jackson

3 On Your Side Investigates: New rate swapping deal on the table in Jackson

By Cheryl Lasseter - bio | email

JACKSON, MS (WLBT) - That interest rate swap the Jackson City Council voted on back in April has been tweaked a bit. City Finance Director Rick Hill tells 3 On Your Side the swap originally involved $112 million. But those involved in negotiations finally compromised on a less risky deal involving $40 million.

The potential rewards are lowered as well. Savings under the larger amount were projected at more than $900,000 per year until 2034 when the bond matures. Savings under the new amount are projected at $392,680 per year.

In addition, the fees payable to the parties who struck the deal are lower. The city would have potentially owed $2,380,000 in fees. That price tag is now down to $1,075,000.

If the deal never materializes, that total will dwindle further.  That's because the only party privy to a contingency fee in that event is City Attorney Sarah O'Reilly Evans and the swap council team, including companies Baker Donelson and Anthony Simon.  According to Hill, Financial Avisors Sterne Agee, Deutsche Bank, and Rice Financial Products would not be paid a fee in that scenario.  "The deal has to go through for them to be paid," Hill says.

The swap deal is still not a done deal. We've learned Jackson's incoming administration must OK it first, whoever those newcomers may be.

And this is one situation where the current stagnant economy is a good thing. "If they take six months (to vote on it), it could affect the transaction. It could possibly even make it not doable," Hill says.  "Mayor Johnson is very familiar with swap products. If he's the mayor-elect he's very familiar with these products. He'll understand the concept of it."

Ward 1 City Councilman and Budget Committee Chairman Jeff Weill is one of two who voted against the original deal, stating the terms were unclear. He still wants an independent expert to scrutinize the terms. "If it's roughly 35% of our other deal, that means our risk is reduced, but $35-40 million is still a lot of money and it needs to be done right," he says.

Jackson's new administration will take office in early July.