Cape Girardeau on pace to pay off River Campus bonds early
Wednesday, December 29, 2010
It was as contentious as bond issues get.
But it appears the city's nearly $10 million obligation to Southeast Missouri State University's River Campus will be paid off sooner than anticipated -- thanks to Cape Girardeau's vibrant hospitality industry, developed in large part by the man who fought hardest against the city's stake in River Campus funding.
In November 1998, Cape Girardeau residents approved an $8.9 million bond issue to help fund the university's home of visual and performing arts. In exchange, the River Campus is open for some public use.
Including the cost of bond issuance and settling up on debt service, the bonds issued totaled $9.975 million, according to John Richbourg, finance director for the city of Cape Girardeau.
The bonds are paid off through city hotel/motel and restaurant tax dollars.
"What we're required to do is anything that is not used for the [Cape Girardeau] Convention and Visitors Bureau budget has to go to the university for those bond payments," Richbourg said.
Anything above and beyond goes into an escrow account, used to pay down the debt faster.
Richbourg said debt payments are running ahead of schedule. As of the latest bond payment in October, there was $2.5 million in escrow, about four years' worth of bond payments, the finance director said.
Southeast had paid $2.45 million in principal through Oct. 1, and more than $2.44 million in interest, Richbourg said.
The debt runs through Oct. 1, 2023, but can be called as early as Oct. 1, 2013.
"The way it's going, they should retire it significantly earlier" than 2023, Richbourg said.
Hotel/motel and restaurant tax revenue until recently has run well ahead of annual projections of 3 percent. Collections approached $1.47 million in fiscal year 2006, a 10.4 percent increase from 2005. Revenue jumped 8.5 percent in fiscal year 2007, 5.45 percent in 2008 and back down to more "realistic" growth of 2.3 percent in fiscal year 2009, in the crux of a national economic recession.
Tax revenue declined 2.3 percent to $1.69 million in fiscal year 2010, as hotel/motel tax collections; plummeted 12.1 percent, Richbourg said. Revenue has rebounded in the current fiscal year, up about 2.55 percent, according to the latest data.
The River Campus, which opened in 2007, survived years of legal battles pitting hotel owner Jim Drury against the city and university in lawsuits that questioned the validity of the bond issue. The businessman, principal owner of MidAmerica Hotels Corp., and the city eventually reached an agreement that paved the way for the construction of the $50 million-plus arts center.
Drury died in 2008, but he left a legacy of community building. His company's hotel, restaurant and retail developments reshaped the city's west end, and boosted the tax draw that helped build the river campus and the arts community.
The River Campus also came under scrutiny from Sen. Jason Crowell, R-Cape Girardeau, who has chastised the university for borrowing money for the project without fully outlining how the debt would be paid. The state eventually picked up the tab for a portion of the River Campus cost.
University officials are on holiday recess this week and were unavailable for comment Tuesday.