A “small resolution with a big outcome” is pending before the Troy City Council, and it could provide financial benefits to both the city and the local hospital.

The council on Tuesday held the first reading of a resolution that paves the way for a restricting of the city’s guaranty of the Troy Hospital Health Care Authority’s $12.5 million debt.

“The funding agreement will enable the Troy Hospital Health Care Authority to take the burden of debt service on itself,” said Rush Rice, the city’s investment advisor. “Right now, the city is liable for all $12.5 million in debt (as the guarantor),” investment advisor Rush Rice told the council members. “Under this resolution, the city will be responsible only for that current year’s debt service … a max annual obligation of about $750,000.”

As an unconditional, unlimited guarantor, the City of Troy effectively bears the credit burden of backing the health care authority’s long-term debt, which was incurred when the authority repurchased Troy Regional Medical Center from private investors.

A 1-cent sales tax levied by the city helps fund the authority and provide funding for the repayment of the debt, which until this funding agreement was in danger of interest rate increases. “With this agreement we have eliminated the possibility of any interest rate increases,” Rice said.

The hospital’s debt is refinanced for 25 years, with a fixed rate of 3.46 percent (including fees). “This eliminates the rate risk,” Rice said, explaining that if even 80 percent of the long-term debt were to see increase rates increased to 5 percent, the hospital would pay an additional $2.5 million in interest over the course of the debt service.

The city benefits because the restructuring removes the $12.5 million debt from its book. “This will have a positive effect on the city’s credit rating,” Rice said. “This, in my opinion, sets the stage for the City of Troy to go after a AA rating.”

The council will vote on the resolution at its next meeting.

In other business, the council on Tuesday:

• Recognized the Charles Henderson High School Lady Trojans basketball team, which advanced to the final four of the state playoffs.

• Awarded the Troy Parks and Recreation Department concessions contract to Sysco. The three-year term begins April 12, 2016.

• Awarded a $1.496 million bid to Blankenship Contracting for water line replacements and repairs. Mayor Jason Reeves said the improvements will be made in the area of the Braswell Street well and water tank, extending to Trojan Terrace. The project also will create redundancy over the Conecuh River.

• Appointed Reeves the voting delegate to the Alabama League of Municipalities upcoming meeting with council member Dejerilyn King Henderson the alternate.

• Met in executive session during the work meeting to discuss potential pending litigation regarding the acquisition by purchase or condemnation property along the Enzor Road Connector Road project. The council voted in open meeting to issue a threat of condemnation for the property as part of the city’s negotiations to purchase the property.

• Granted a tax abatement to Whaley Pecan Company, which plans a $215,000 capital improvement at its Troy facility. Reeves said Whaley will be expanding to including on-site confectionary abilities at its plant.