Mobile is continuing to search for a new cruise ship to replace the Carnival Elation.
The Elation moved to New Orleans Saturday, leaving Mobile scrambling to find a replacement to help pay $22.17 million of long-term debt, including warrants, which are similar to bonds.
Carnival Cruise Lines had stationed a ship in Mobile since 2004. The Elation carried 3,000 passengers and crew but Carnival said fuel costs were higher there than in other ports, and it had to offer below-market rates to lure passengers.
The city borrowed to repay debt for the construction of the cruise terminal, and borrowed additional funds for improvements. It used parking revenues to pay $2 million a year in debt service, according to the Press-Register.
Operating costs will be cut at the terminal, city spokeswoman Barbara Drummond told the newspaper.
Parking revenue will cover the debt service payment this fiscal year, though the city could be forced to draw from the general fund if new revenues don’t materialize, Drummond said. “It’s 2013 when we’ll be impacted financially,” she said.
The city has $300.7 million of outstanding debt. Its general obligation rating is A1 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
In August, S&P revised Mobile’s outlook to negative from stable. It cited the city’s plan to draw down $17 million of its $26 million general fund reserve in fiscal 2012 without a plan to balance the subsequent year’s budget.
“The significant fund drawdown could also lead to the deterioration of the city’s financial position and cause us to lower the rating,” Standard & Poor’s said.
