City moving ahead with bond issue
Published 9:00 pm Tuesday, February 8, 2011
Financial advisors are recommending the City of Troy adjust the plans to refinance both general obligation and utility revenue bonds.
The proposals, shared by Mayor Jimmy Lunsford at Tuesday’s city council work session, changes the structure of the financing to improve the city’s cash flow for debt service.
The council has approved the refinancing of existing utility bonds and the borrowing of $8.4 million in new funds to pay for sewer and drainage improvements. In addition, the council approved the refinancing of the nearly $10 million in existing general obligation bonds as well as the borrowing of $5.3 million to fund, among other things, the construction of a new public library.
The recommendations outlined in a memo from Bob Young of The Frazier Lanier Company call for wrapping the new $5.3 million in general obligation bonds around the existing bonds rather than combing the two into one, 25-year bond issue. The existing bonds mature in 2023, and financing the new bonds on a 20-year amortization will allow for better interest rates.
“We find that a 20-year financing is more economical,” Young wrote. “Since you will be paying interest only through and including fiscal year 2023, the lower interest rate on a 20-year bond issue versus a 25-year issue will mean that the interest payments are lower in the early years with a shorter maturity. That means more cash flow for the general fund.”
As for the utility bonds, Young recommends refunding the original 2002 bonds and combining with the new capital being borrowed on a 25-year issue. “… This will result in a lower payment of $100,000 for the next 13 years,” he wrote.
Lunsford said he approved of the plans as outlined by Young and, since the council already had granted approval for the bonds to be issued, would proceed with the process. “I’d like to tell them to go ahead,” he told the council.
In other business on Tuesday, the council:
• Granted a liquor license to Edward Mason Baker for Potreros Night Club. The lounge will be located a 106 U.S. 231 North.
• Approved a resolution supporting the Alabama Department of Transportion’s plan to resurface U.S. 231 North from Monticello Drive to County Road 84, which is north of the Troy Municipal Airport. “The project is totally paid for by the state. They just need our concurrence to move ahead,” said Johnny Witherington, council president.
• Approved a 90-day extension of a line of credit for the Troy Hospital Health Care Authority. “That’s not the $11.5 million loan,” Lunsford said. “It’s just a line of credit for operations.”
• Heard the first reading of the Pike Area Transit Authority’s substance abuse policy ordinance. Witherington said the council has previously approved this ordinance, but PATS officials have requested a change in the ordinance to include the word “marijuana,” which was omitted from the original ordinance.
• Heard an update from Lunsford on the Economic Development Association conference in Montgomery, which he has been attending.
• Heard a reminder from District 2 Councilman Charles Meeks about the month-long special cleanup offered in the district. “This is an opportunity to get rid of old furniture, appliances, tree limbs,” he said. “All you have to do is call Vaughan Daniels at 566-1133 to schedule a time for pickup.”