East Point advisers outline $45M financing options, warn hotel-motel tax won’t cover debt service alone

A financial advisory team and underwriters told the East Point City Council on July 14 that financing a proposed community recreation center with an added pool could require roughly $45 million and that the city should plan multiple revenue streams to repay debt.

The council heard a presentation from a city financial adviser and Marquita Jackson, lead underwriter at JPMorgan, who said a general obligation (GO) bond or an intergovernmental revenue contract would generally produce the most affordable borrowing costs. Jackson said the 20‑year tax‑exempt benchmark was around 4.3 percent and that local credit spreads would be added to that benchmark for the city’s rate.

Why it matters: The presentation tied a large capital decision — a new recreation center and a potential pool — to the city’s ability to identify reliable revenue sources for debt service. Council members pressed staff on how much hotel‑motel tax and special‑district revenues could reasonably cover, and whether additional projects (auditorium, old city hall or library work) should be bundled with the rec center in a single financing package.

Details from the presentation

Courtney (financial adviser) told the council the city still “does have debt capacity,” estimating about $70 million in borrowing room before affecting a double‑A rating, but he emphasized the difference between capacity and affordability: “affordability is how do we pay that debt back.” He and JPMorgan’s Marquita Jackson described four main structures: GO bonds (referendum option), intergovernmental revenue contracts (conduit issuers such as the East Point Building Authority or Business/Industrial Development Authority), lease‑purchase installment sales (appropriation debt), and pure revenue bonds (project revenues only). Jackson said intergovernmental contracts and GO bonds typically trade similarly in the market and “will be the most affordable borrowing cost for you.”

The advisers used a $45 million example (a $33 million rec facility plus a $12 million pool placeholder) and modeled term alternatives. A 20‑year issue at the assumptions used would have a higher annual debt service but less total interest versus a 30‑year issue; stretching to 30 years lowers annual cash need but increases overall interest paid.

Revenue options and legal forms

Advised potential revenue sources included general‑fund revenues, hotel‑motel tax receipts (the advisers used $1.4 million as a conservative starting point), community improvement district (CID) or special service district (SSD) levies, and program‑generated revenues from the facility itself. The advisers noted some constraints: Fulton County has no SPLOST available to the city, and pure revenue pledges (for example, only hotel‑motel tax) typically carry higher interest rates because the investor pledge is narrower.

The advisers described how an SSD could be drawn geographically (commercial properties only, or another configuration) and used either on a pay‑as‑you‑go basis or leveraged into bonds backed by projected SSD revenues — the Atlanta BeltLine was cited as a successful example of using a district levy to finance improvements.

Council reaction and next steps

Council members pressed staff and consultants on several points: the reliability and recent history of hotel‑motel tax receipts, the fiscal risks if pledged revenues fluctuate, the impact of including multiple projects in a single financing, and whether to go to voters for a GO bond referendum versus using an intergovernmental contract. Council member Cummings argued that because an intergovernmental contract still pledges the city’s full faith and credit, the council should consider a GO bond referendum to allow voter approval. Other council members urged staff to finalize cost estimates for the pool, auditorium and old city hall and to return with clearer revenue projections.

City Manager Mr. Jones and advisers told council they would continue work on audit completion (FY24 closeout and FY25 audit work are prerequisites for rating agency discussions), clarify property ownership issues for the proposed rec center site (the city will need title in place for some financing structures), and return with expanded cost and revenue detail. The council directed staff to bring updates back for further discussion at the August work session.

Ending

The presentation left open several decisions — choice of financing structure, whether to bundle other city facility projects, and the final scope of the rec center and pool — but clarified that GO or intergovernmental structures would be the most affordable paths in current market conditions and that a mix of revenues would likely be necessary to support repayment.