Convention Center Financing Needs Change In State Law
By Ben Hall Investigative Reporter
NASHVILLE, Tenn. - The Convention Center has passed the Metro Council and construction has started. But the new convention center still needs a change in state law to complete its financing.
Metro officials have asked state lawmakers to rush a bill through the legislature that will exempt the $585 million project from lending laws other government projects must follow.
Metro needs a change in state law to legally sell bonds for the project. Metro officials have been working behind the scenes at legislative plaza to get a change in state law so it can legally pay for the Music City Center project.
"We are acting as expeditiously as we can," said State Senator Thelma Harper (D) Nashville.
Senator Harper is sponsoring the bill (SB 2975) that would grant Metro an exception to the section of Tennessee's usury law that sets the maximum interest rates cities can legally pay on bonds.
"When we go to sell the bonds there's a possibility the rate might be slightly above what's legally permitted. Since we had a little time before we sell the bonds, we said lets go ahead and get this cleared up," said Metro Finance Director Rich Riebling.
Riebling said it just a "housekeeping matter" and the project will not be delayed. An article in Wednesday's Bond Buyer Newspaper said Metro hoped to sell bonds last month, but the sale was delayed until the legislature changes the law.
Riebling denied the report.
"We always knew it was going to be 60 to 90 days to get the financing done even just in the due course," said Riebling.
Current state law prevents municipalities from borrowing money at a four points above the prime lending rate. Because the prime rate is so low, state law prevents Metro from borrowing money at a rate above 7.25 percent.
The type of bonds Metro wants to use will provide a federal subsidy on the back end, and Metro said that will save millions of dollars in the long run.
"If they went straight out without using us they would violate the usury law," said Harper.
Harper said there is no opposition to changing the law.
Metro officials said they've met with Governor Phil Bredesen's office, and they expect smooth sailing through the legislature. The change in law will only apply to the convention center.
Metro is funding the convention center primarily through Build America Bonds. They are special bonds that are part of the federal stimulus package.