Mamtek collapse hurt Moberly's credit, but finances safe
Thu, 04 Sep 2014 02:37:18 GMT —
Moberly's city manager said Wednesday the Mamtek collapse cost the city little besides legal fees.
Andrew Morris told KRCG 13 the city has amassed about $936,000 in legal expenses in the nearly three years since Mamtek U.S. went out of business after promising to build an artificial sweetener plant in the city. Former Mamtek CEO Bruce Cole pleaded guilty on Tuesday to fraud and stealing charges. He is expected to serve 5 to 7 years in state prison. Morris said although the city had approved some $39 million in bonds for the project, city officials did not plan on setting money aside for the bonds until the facility started generating revenue.
"No project, no revenue, so the council obviously voted not to appropriate," Morris said.
The city did lose a bond on a nearby landfill worth about $71,000. Morris said this is the only loss the city incurred outside of legal fees.
Of greater significance was the city's decision not to finance the Mamtek bonds. After that happened, Standard & Poor's reduced the city's credit rating from A to B. That meant S&P considered Moberly to have a slightly higher risk of default, which means the city will have to pay a higher return on future debt. On S&P's scale, a B rating is neither investment-grade nor high-risk.
Last August, city staff were asked to consult finance companies on how to improve Moberly's credit rating. Morris said staff found plenty of room for improvement, even in areas unrelated to economic development. Recommendations currently before the city council include developing debt management and economic development policies and setting a regular audit schedule. The council is expected to vote on a due diligence policy later this month that would require any economic development proposal that involves city assistance to be reviewed by an independent third party. Morris said such a policy could have prevented the city's troubles with Mamtek.
Morris said the city would like to recover some of its legal fees from any payments Cole is ordered to make, but he said those payments would most likely go to individual bondholders who bore the brunt of the Mamtek collapse.