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TLDA defers Ocoee Utility District debt request after questions about advisory fees and compliance
Summary
The Tennessee Local Development Authority deferred a decision on Ocoee Utility District’s proposed $37.5 million USDA financing and $25 million revenue bonds after members flagged unusually high municipal adviser's and issuance fees, outstanding audit issues and TBOR compliance items.
The Tennessee Local Development Authority on June 23 voted to defer consideration of a multi-part financing request from Ocoee Utility District and requested additional information and attendance by utility leadership at the next meeting.
TLDA staff told the board the district seeks a $37,500,000 USDA bond anticipation note (BAN) followed by a $37,500,000 USDA bond, a $5,000,000 USDA grant, and $25,000,000 in water and wastewater improvement revenue bonds. The district requested parity between the USDA loan and the revenue bonds and parity with the district’s outstanding SRF loans. Staff recommended approval conditioned on compliance with the Tennessee Board of Utility Regulation (TBOR) requirements and waiver of an SRF loan agreement provision that would otherwise prohibit issuance after a late audit filing; the district included an explanation for the late audit in the packet.
Staff and the Comptroller’s Division of Local Government Finance reported unusually high fees disclosed for the transaction: a municipal advisory fee reported at $375,000 and an additional estimated $612,000 related to the planned USDA bond anticipation notes — a combined total cited in staff remarks of about $987,000. Comptroller Mumpower said those fees “could appear, I’m not saying it is, it could appear that it is” excessive for a utility under financial scrutiny and asked for deeper review.
Larry Kidwell of Kidwell and Company, the municipal adviser, defended his firm’s approach and said the agreement’s municipal adviser fee “has been the same at the same level, the 1.5% for the entire period of time,” and described the firm’s focus on securing better bond pricing for clients. Pat Alexander of Bradley Law Firm, bond counsel for the district, said his fees for the combined transactions were “$30,000 or $35,000” for the state issue and “$65,000” for the USDA issue, as he recalled.
TLDA members raised other concerns: the district is under TBOR jurisdiction for financial distress; TBOR had required a rate study and certain submissions due by Dec. 30; the district reportedly is buying excessive water from other systems due to degraded infrastructure. Board members said they wanted the utility’s manager and board chair to appear in person at the next meeting and asked TLDA staff, Comptroller staff and the district’s advisers to provide more detailed fee documentation and a fuller explanation of the financing structure.
Comptroller Mumpower moved to defer consideration to the next meeting, asking that TLDA staff work with Kidwell and Alexander and that the utility’s manager and chair appear physically at the next meeting. The motion passed unanimously on roll call.
The TLDA did not approve the debt issuance at this meeting. The board directed staff to continue review with the parties and to return the item once additional documentation and participation are provided.
