WASHINGTON — Buena Vista, Va. will stop making payments on a bond issue that its officials say has become an albatross around the small city's finances.
Buena Vista's Public Recreational Facilities Authority issued $9.2 million of bonds in 2005 to construct the Vista Links golf course. That debt was supported by the authority's revenues as well as liens on the golf course, police station, and city hall.
But the course never lived up to its revenue projections.
For the past three years, in accordance with a 2011 forbearance agreement with bond insurer ACA Financial Guaranty Corp., the city of about 7,000 residents has been making 50% of its scheduled debt service payments. Earlier this month the city council decided to end those payments.
"This issue has hindered the city of Buena Vista's progress for the past decade," Mayor Frankie Hogan said in a statement.
Bondholders have continued to receive their payments under the forbearance agreement, and city attorney Brian Kearney said ACA is obligated to continue to make those payments. The next one is due Jan. 15. Kearney said the debt belongs to the authority, not the city, and that the city has been trying to honor its moral obligation to make good on it.
"The city was trying to honor its agreement, Kearney told The Bond Buyer. "We cannot continue."
The city is now attempting to work out a negotiated settlement with the insurer, Kearney said.
The city has suffered continuously with the debt for years. The recession hit the city hard, and the bonds have been in technical default since 2010 when the city did not appropriate general fund revenue for debt-service payments from its fiscal 2011 budget and the trustee was forced to draw on the reserve funds to meet debt service payments. The bonds are set to mature in 2027.
The city had also slashed hundreds of thousands of dollars from the course's operating budget to offset some of the costs of the payments, with the specter of literally losing its city hall hanging over it.
"By pursuing a negotiated settlement, we are doing what's best for our residents, our employees, and our regional partners," Hogan said in a press release.
