Authorization & Purpose
The Mississippi Development Bank was created by the Mississippi Legislature in 1986 as an independent organization with the power to “borrow money and issue its bonds and notes to make funds available [to local governmental units: which means any county, municipality, regional solid waste authority, county cooperative service, political subdivision, utility district, state agency or other governmental unit created under state law] at reduced rates and on more favorable terms”. The legislature stated that it is the Development Bank’s purpose to “finance infrastructure improvements and other public purposes from the proceeds of bonds and to the extent possible, reduce costs of indebtedness to taxpayers and residents of the State through the encouragement of investor interest in the purchase of such bonds.”
MBFC/Mississippi Development Bank Board
All powers conferred upon the Mississippi Development Bank are vested in the Board of Directors of the Mississippi Business Finance Corporation. The Board of Directors of the Mississippi Development Bank is composed of nine (9) directors to be elected by the members of the Mississippi Business Finance Corporation. The Board typically meets immediately following the Mississippi Business Finance Corporations Board meetings each month.
The Mississippi Development Bank is a statewide issuer of revenue bonds with proceeds going to local governmental entities. Local governmental units must request that bonds be issued through the Mississippi Development Bank on their behalf and are responsible for the retirement of revenue bond debt through annual payments to the Mississippi Development Bank.
The benefits of the Mississippi Development Bank flow directly to the local governmental unit. These benefits include the following:
- Ready access to bond funds;
- Provides for a higher bond rating, resulting in lower interest rates;
- Does not count against a local government general obligation debt limit;
- Allows smaller units of government, that may be unable to issue stand alone revenue bonds, to issue bonds through the Mississippi Development Bank;
- Greater flexibility in bond covenants and debt service coverage requirements;
- Tax-exempt interest rates for a period of up to 20 years.
The security for Mississippi Development Bank bonds is a lien on revenues of the local governmental entity. A Mississippi Development Bank revenue bond may also contain the moral obligation of the State of Mississippi. This structure provides for a higher bond rating resulting in lower interest rates. Through this feature, should a local governmental entity fail to make debt service payments on the bonds, the State Tax Commission can withhold sales tax, homestead exemption, and other funds to make those payments.