TLDA delays decision on Ocoee Utility District bond plan after questions about fees and oversight

The Tennessee Local Development Authority on June 23, 2025, deferred action on a complex financing proposal from Ocoee Utility District after board members and staff flagged several concerns, most notably unusually high municipal-adviser fees and the district's standing under the Tennessee Board of Utility Regulation.

TLDA staff described the proposed financing as a multi-part package: a $37,500,000 USDA bond anticipation note (BAN) with a later USDA bond of the same principal amount (the BAN would be repaid by the subsequent USDA bond), an associated $5,000,000 USDA grant, and a separate $25,000,000 water and wastewater improvement revenue bond issue. The district requested parity between the USDA loan and the revenue bonds and sought a waiver of a loan-agreement provision that prohibits additional debt when audited financial statements are late; staff said the district did not timely file audits and included an explanation letter in the packet.

Staff briefed the board that the district is under the jurisdiction of the Tennessee Board of Utility Regulation (TBOR) for financial distress and that TBOR had required the district to submit remaining items by December 30 (as noted in the packet). A consultant-conducted rate study ordered by TBOR recommended rate increases the district subsequently adopted; staff said those increases were factored into the district's financial projections.

Separately, TLDA staff and the Comptroller's Division of Local Government Finance reported unusually high advisory fees tied to the transaction: a municipal-adviser fee reported in the packet of $375,000 plus an additional estimated $612,000 related to the proposed USDA BAN, which staff said reflected a 1.5% contracted fee ("$15 per thousand" in the adviser agreement) and add-ons; staff said those combined fees were substantially higher than typically seen on comparable state transactions.

Larry Kidwell of Kidwell and Company, the municipal adviser on the matter, defended the fee structure in remarks to the board, saying his firm's model focuses on sustained advisory involvement and producing higher bond pricing for issuers. "We believe we achieve excellence in every sale in bond pricing," Kidwell said. He described a longstanding advisory relationship with the district and said his contracted 1.5% fee had been consistent over many years of work for the district.

Pat Alexander of the Bradley Law Firm, bond counsel to the district, told the board he was new to this engagement as the district's bond counsel. Alexander said his firm’s fees for this transaction were approximately $30,000–$35,000 for the $25 million bond issue and $65,000 for the USDA issue (figures stated from memory at the meeting).

Comptroller of the Treasury Jason Mumpower said the scope and scale of the fees "could appear" abusive to the utility and its ratepayers and asked whether the fee arrangements met MSRB standards. Kidwell said his firm follows MSRB rules and has compliance counsel; Alexander said as bond counsel he would not opine on MSRB compliance. Several TLDA members said they wanted more information and recommended follow-up between TLDA staff, the Comptroller's office and the district's advisers.

Comptroller Mumpower moved to defer consideration to the next TLDA meeting, directing Comptroller staff and other TLDA staff to work with municipal adviser Larry Kidwell and bond counsel Pat Alexander and requesting that the utility's manager and its board chairman appear in person at the next meeting. The board voted unanimously to postpone the item and reconvene for further review.

The TLDA also noted that the Comptroller's Division of Local Government Finance had put a review on hold pending further questions about the municipal-adviser fees. TLDA members said the additional review and the requested in-person attendance by the utility's leadership should provide the board more confidence when the item returns for consideration.