What does $540 million in bonds sought for Macon-Bibb projects mean for taxpayers?

Macon-Bibb County’s industrial and urban development authorities are at the heart of the financing that leaders say poses very little risk


Liz Fabian

The old Sears facade of downstairs at Macon Mall awaits renovation with an expected $40 million in bond financing through the Macon-Bibb County Urban Development Authority.

Advocates of the proposed $680 million Brightmark plastics renewal plant in south Bibb County and the $40 million Macon Mall renovation and amphitheater are seeking more than a half-billion dollars in local government bonds.

Both announcements have some people questioning the financing and potential risk for Macon-Bibb County taxpayers when local government authorities issue bonds.

The Macon-Bibb County Industrial Authority is considering issuing $500 million in Exempt Facility Revenue Bonds for Brightmark to build a 5.3 million-square-foot-plant near the Middle Georgia Regional Airport. With this type of bond, the authority has no financial liability if the company fails to make payments.

A municipality can issue general obligation bonds to raise money for major projects. In those instances, they are obligated to repay bond holders and are authorized to raise taxes to do so.

All bonds are like an IOU between a lender and borrower. If an investor buys a $1,000 bond, the company gets the money but agrees to pay interest to the lender throughout the specified term of the bond. Once the term ends, the investor should get the $1,000 back on top of all the interest accrued during the term.

In certain instances, like the Brightmark bond deal, that interest is exempt from federal and state income taxes, which incentivizes investors.

In this proposed deal, the industrial authority is not lending any money. Under federal tax rules, the authority serves as a conduit between the lender and the borrower to facilitate economic development. The Georgia General Assembly created the Macon-Bibb County Industrial Authority in 1962 and established it as a conduit for bond financing.

If the deal is signed, the authority would be endorsing the project which can ease investor concerns about the viability of the project once the bonds go to market. Brightmark is expected to bring 100 new jobs off Walden Road in the south end of the county.

Under Georgia’s bond allocation system, economic development projects are supposed to create or retain one job for every $125,000 in financing. With Brightmark’s hiring plans and proposed $500 million in bonds, the operation will fall short of that quota by 3,900 jobs.

Kevin Brown, legal counsel for the industrial authority, said the state waived that requirement which has been in place for at least two decades, he said.

“It’s very unusual to find a project that fits that requirement,” Brown said. “Typically, we have to do a waiver.”

State economic developers brought the Brightmark project to the Macon-Bibb County Industrial authority.

When it comes to bonds, the federal government authorizes Georgia to issue tax exempt bonds with a limit of up to $110 in value per person in the state. The full amount each year varies depending on unused carry over from prior years, Brown said.

For 2021, that cap amounts to nearly $1.2 billion. The Brightmark deal would eat up nearly half of this year’s state allowance.

If it weren’t for government financing options, Brown doubts the plant could be built.

“Most banks don’t have lending limits that would allow for anything of this size. There’s no way even a conglomeration of banks would do it,” he said. “So typically, you go out to the market and let these large institutional investors to be able to put that kind of money available.”

Kenneth Tah

The Brightmark agreement involves revenue bonds which are only repaid if the operation generates money. If there is no revenue, the investors lose out.

“Those that are investing in this kind of bond, they need to be aware that there is a possibility that they might not get their money back if the company doesn’t make revenue,” said Mercer University assistant professor of finance Kenneth Tah.

Securing this type of financing gives the company the capital it needs to build the facility.

An ‘eyebrow-raising’ proposal

Attorney Blake Sharpton points out proposed Macon Mall renovations while discussing bond financing with the Urban Development Authority in November. (Liz Fabian)

The up to $40 million bonds planned for the Macon Mall project are also revenue bonds.

In this case, the Urban Development Authority has agreed to issue the bonds at the request of the Macon-Bibb County Commission.

Mayor Lester Miller sees very little risk in funding his dream of building an amphitheater for 10,000 people and creating new work spaces for county offices.

The bond obligations will be met with rent paid by current and future businesses and county departments moving to the mall, according to the pending agreement. The county currently pays rent in a number of buildings it does not own, Miller said. Under the plan, Macon-Bibb would use that rent money that’s already budgeted to pay itself and reimburse the bonds.

“The mall currently has about 20-something tenants now. It’s profitable, even though it’s not full, and certainly with the government involvement in there, things will get less expensive for the mall,” Miller told the Center for Collaborative Journalism in the October segment of Ask Mayor Miller.

The mayor plans to shift government offices such as the board of elections, business services and planning and zoning commission to the mall. The move creates an automatic customer base that could potentially attract more shops and restaurants. The amphitheater project has already spurred interest in property in and around the shopping center, he said.

Although final details are still being worked out, Miller says he’s raised eyebrows when telling people the proposal is not costing the county any money.

Mall owner Hull Property Group will deed over about a half of the property to the Urban Development Authority “free and clear,” Miller said.

That will enable the amphitheater project to move forward right away once bond financing is secured.

Through the authority, Macon-Bibb will have joint ownership of the remainder of the property for $1 per year.

“That’s important because it allows us to keep a lot of the property on the tax digest to own money,” Miller said.

After six years, Miller hopes the county will own the entire property.

Brightmark success ‘remains to be seen’

In both bond deals, the respective authorities will issue bonds that are sold on the market. A bank receives the revenue and passes it onto the bond holder.

“The authority never actually handles any money,” Brown said. “It’s literally just a conduit in order to make sure that the federal tax procedures are met in order to get the tax exemption.”

While there might not be financial liability for the authority, its reputation in the bond market could suffer if Brightmark fails to generate a profit on the groundbreaking effort to turn plastic into diesel fuel.

“So, it’s also good for local communities to the local government authority to also do their own due diligence in the kind of companies they are backing because they can really solve our repetitional,” Tah said.

Environmentalists and local residents spoke against the Brightmark project during the Tax Equity and Fiscal Responsibility Act hearing Nov. 29.

They fear the process and by-product will hurt the environment and have concerns about the viability of the operation.

Industrial authority Chairman Robby Fountain said the hearing is part of the ongoing vetting process that included a trip to Brightmark’s plant in Indiana, where the company is working to take plastic waste and pelletize it to run through vats and turn it into diesel fuel.

“Have they actually made fuel yet? They have not, and that still concerns us in Macon,” Fountain said. “The technology is cutting edge. Will it work? It’s yet to be seen.”

Fountain wants the company to have a chance to use “cutting edge technology” to handle used, discarded plastic.

As the authority continues to determine whether the project is good for Macon-Bibb County, bond underwriters will be doing the same to protect investors. The authority does not have a deadline set for the vetting process.

There are other hurdles the company must clear, including federal and state environmental regulatory agencies.

Brightmark also has a conditional use application before the Macon-Bibb Planning and Zoning Commission. P&Z was scheduled to take up the proposal Dec. 13, but deferred the item to after the first of the year.

In the interim, the industrial authority Executive Director Stephen Adams said the authority continues to take public comments on the project at [email protected].

“We want to be what is good for industrial development to be good for the whole community,” Adams said.

Civic Journalism Senior Fellow Liz Fabian covers Macon-Bibb County government entities and can be reached at 478-301-2976 or [email protected].