BRADENTON, Fla. - Port St. Lucie, Fla., will only recover 6% from the bond-laden incentive package the city used to lure a digital effects studio to town.
The city will receive $3.18 million from a court-approved global insurance settlement that was finalized May 20 in the wake of the 2012 bankruptcy of Digital Domain.
The original incentive package totaled $51.8 million, and included $39.9 million of lease-revenue bonds sold in 2010 to build and furnish a state-of-the-art studio for Digital Domain Media Group.
Port St. Lucie remained on the hook to make good on its pledge to pay debt service when the digital effects company collapsed less than a year after opening.
"This recovery does not fully repay the original investment but with the building sold to a caring and community-oriented new property owner, and this seven figure payment soon to be in hand, we have made the most of a difficult situation," Mayor Greg Oravec said in a statement posted on the city's website Wednesday.
The city made all debt payments and restructured the bonds in 2014 to provide budget relief.
Last year, the building was sold at a loss for $13 million to the megachurch Christ Fellowship, which boosts the city’s recovery to 31%.
The state of Florida will receive $2.1 million from the insurance settlement, out of $20 million in incentives it provided.
"It is now time to close the book on Digital Domain and focus our attention on the city's remaining strategic priorities," Oravec said.
Those priorities, he said, include pursuing a lawsuit involving another failed economic development project: the now-defunct Vaccine and Gene Therapy Institute.
Port St. Lucie issued and guaranteed $64 million of lease revenue bonds in 2010 to finance VGTI's 100,000 square foot, state-of-the-art research facility. The institute defaulted on its mortgage payments in May of last year and closed five months later.
The city subsequently filed suit seeking recovery. A trustee has been appointed to oversee and market the estate.
Port St. Lucie has paid all debt service on the failed economic development projects although they have strained finances and taken a toll on its ratings.
Last year, Moody's Investors Service downgraded the city's general obligation bonds to A1 from Aa3 and its lease and revenue bond ratings to A2 from A1 because of the pressures. The outlook was revised to negative from stable.
In March, Moody's put the ratings on review for downgrade again after TD Bank, the trustee for VGTI's bonds, questioned whether the city would honor its covenant to pay debt service.
Moody's concluded its review on May 12 without any rating change after TD Bank resigned and the city appointed UMB Bank as trustee.
Moody's retained the negative outlook while affirming A1 ratings on $111 million of outstanding GO bonds and A2 ratings on $129 million of non-ad valorem and lease-backed debt.
"The negative outlook reflects the outstanding uncertainty around the VGTI project and how long the city may have to pay legal and maintenance costs," Moody's said, adding that the general fund could be pressured due to its partial support of the debt.
S&P Global Ratings rates the city's GOs AA-minus and the economic development bonds A-plus. The outlook is stable.