“All we are waiting for is someone to write a check,” said Madison County, Miss., attorney Mike Espy referring to a legal dispute with Radian Asset Assurance over county contributions to an improvement district’s bond payments.

BRADENTON, Fla. — Mike Espy jogs twice a week on what he calls a "very nice" pristine stretch of highway in the undeveloped Parkway East Public Improvement District in Madison County, Miss.

The four-lane divided highway was part of the infrastructure built with the proceeds of $27.7 million in limited obligation special assessment bonds issued by the PID in 2005, and $3 million of completion bonds issued in 2008.

So far, a lawsuit between the county and a bond insurer is the biggest thing to develop out of the bond issues.

The commercial development planned for the 1,050-acre district never happened for a number of reasons, said Espy, Madison County's attorney.

The district, he said, was a victim of the recession when landowners could not pay the high assessments that were supposed to support bond payments, and of the fact that portions of the PID are in low-lying areas prone to flooding.

Radian Asset Assurance Inc., which insured the 2005 bonds, paints a different picture of what fostered the district's demise in a lawsuit it filed in 2013.

Radian, acquired by Assured Guaranty Corp. on April 1, did not respond to questions about the lawsuit.

Radian's suit alleges that local political resistance interfered with the potential success of the district, as did decisions made by Madison County on how it complied with its own agreement to contribute funding if there was a shortfall in the PID's bond payments.

While Madison County was not a party to the bond issue, Espy said, the county did agree to contribute funding if there was a shortfall in the PID's payments. In turn, the PID had two years to reimburse the county for its contributions.

The county made four contributions to the debt service shortfall between October 2011 and September 2013, then stopped payments when the PID failed to reimburse the county two years after the first payment was made. No reimbursement payments from the district have ever been made.

In its suit, Radian argued that the failure of the district to reimburse Madison County did not excuse the county from its obligation to make debt service contributions.

In an April 20 ruling in Radian's suit, U.S. District Judge Carlton Reeves appeared to agree with the insurer.

"The amount of time the district has to reimburse the county is independent of the duration of the county's duty to make bond payments," Reeves said.

Espy said that all the ruling means is that the county's contribution agreement is enforceable, not that the county must resume contributing to bond payments.

"No one from the county is saying the agreement is not valid nor does it discontinue," he said. "All we are waiting for is someone to write a check and then we will have no other choice but to continue paying the shortfall payments."

While the judge's ruling deferred judgment on how long the county's obligation to make payments lasts, the ruling also said that the county must continue to make contributions to debt service beyond two years, according to a bond attorney who reviewed the judge's ruling and asked not to be identified.

Espy said the county's determination to stop bond payments has nothing to do with its ability to pay, having absorbed more than $500,000 defending itself from Radian's lawsuit, in addition to paying more than $2 million toward the district's bond payments.

"We were sued, and we are vigorously pursuing the lawsuit, and we will defend ourselves," he said. "There's no [financial] strain whatsoever."

Standard & Poor's analyst Kate Choban, who covers the improvement district's credit, said the circumstances that have arisen in Madison County point to more than just another land-secured project that failed when the economy soured.

"My opinion is people should care about this because our ratings encompass the ability to pay and the willingness to pay," she said.

On Wednesday, S&P downgraded the Parkway East Public Improvement District's 2005 special assessment bond ratings to D from CC, citing the claim on insurance to complete the May 1 bond payment. S&P does not rate Madison County's general obligation debt.

"The D rating reflects our view that a shortfall of pledged revenues, combined with the county's lack of willingness to replenish the debt service reserve, led the bond trustee to make a claim made on May 1, 2015, on the bond's insurance policy in order to make the full principal payment due on the series 2005 bonds," Choban said in Wednesday's rating action report.

Moody's Investors Service assigns Aa2 ratings to Madison County's GO bonds. The county has about $100 million of outstanding GO debt.

In a Feb. 4 credit review, Moody's said its rating reflects the county's large tax base and economy that benefits from relative stability due to its proximity to Jackson, the state capital.

"The rating also reflects a favorable socioeconomic profile, sound fiscal operations demonstrated in relatively consistent reserves, and a modest debt burden with average principal amortization," said Moody's analyst Roy Ousley.

Moody's also said the county's liabilities include debt burdens from Parkway East and Parkway South Public Improvement District's totaling $29.4 million, "due to the county's contribution agreement to assist in deficiency debt service payments, which is currently in litigation."

Madison County made four payments under the shortfall contribution agreement it signed with the district: $374,021 on Oct 24, 2011; $464,376 on April 25, 2012; $518,401 on Oct 24, 2012; and $676,514 on April 16, 2013.

"We've not gotten reimbursement for the Oct. 24, 2011 contribution," Espy said, "so we notified [the trustee] that we would suspend all shortfall payments."

Since 2014, subsequent bond payments have been made from a revenue fund and the debt service reserve.

The trustee used remaining revenue funds and reserves to make the May 1 bond payment in conjunction a payment from the insurer.

A trial by jury is set for Oct. 5 in the lawsuit between Radian and Madison County.

The county will continue its defense in court based on its interpretation of the contribution agreement, Espy said.

"I just believe we're going to be standing there representing the local taxpayers and on the other side is going to be a New York billion dollar insurance company," he said. "We will let a jury decide but it doesn't make sense.

"All somebody has to do is write us a shortfall check and we would have to continue following the contribution agreement," Espy said.

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