Columbus City Council voted 5-1 Tuesday night to signal its intent to issue a $6.5 million general obligation bond to pay for capital improvements, despite concerns from some council members over the city’s existing debt and the financial outlook amid the COVID-19 pandemic.
The $6.5 million bond could help pay for infrastructure improvements in the city, such as street paving, truck purchases and other needs, Ward 6 Councilman Bill Gavin said.
To pay off the bond, the city would raise the property tax millage rate over several years and dedicate the generated revenue toward the debt, Gavin said. The payback method diverges from the city’s traditional way of paying off the street paving bonds — using money from the city’s general funds to either pay for the work directly or repay bonded debt issued for such projects, he said.
The city took out multimillion-dollar bonds in 2010, 2014 and 2016 for street paving and planned to pay them off in 15 or 20 years, The Dispatch reported. All the bonds would be paid off by 2031, city records show.
“We would take the money out of incomes we had at that time without doing the tax increase … so that we wouldn’t put the burden on the people,” Gavin said. “And since then, it’s drained the coffers a little bit. We still owe money on most projects, and the streets need repaving again.”
The city, which was $36.4 million in debt by March, now carries roughly $14 million of debt from those street paving projects over the years, city Chief Financial Officer Deliah Vaughn said Tuesday.
Financial Adviser Lynn Norris of Tupelo said the bond could help set up a capital improvement plan for the city, which could pay for infrastructure improvements and other projects. The millage increase, he said, would guarantee a steady revenue source toward those projects long term.
Norris presented the council with three payback options on the bond. If the city opts to pay the bond off in 10 years, the interest rate would be 3.25 percent and the city would have to raise the millage rate by 1.25 mills every year from 2022 through 2025, Ward 4 Councilman Pierre Beard said.
The millage rate increase schedule would be the same for a 12-year bond option, which would require the city to pay a 3.5-percent interest, Beard said. The 15-year option, he said, would allow the city to raise one mill each year for 2022, 2023 and 2025.
Gavin told The Dispatch the millage increase provides a more secure revenue option for capital improvements, since the city would no longer rely on the ups and downs of sales tax revenue, which accounts for roughly 40 percent of its income.
“This (plan) has a built-in financial stream that we know we will have the money to come in every year to pay for it,” he said.
The city’s millage rate stands at 51.24, Lowndes County Tax Assessor Greg Andrews said. Of that amount, 8.2 mills pay toward the city’s general obligation bonds, Vaughn said.
A 1-mill increase, Andrews said, would normally bring the city roughly $190,000 in additional revenue each year. However, he warned the revenue could be lower with the city’s loss of several local businesses over the years and the negative impact of the COVID-pandemic.
Despite the impact of the pandemic, Beard said he thinks the city is in good shape to pay back the bond, pointing to the millage increase and the internet sales tax revenue the city began to receive this year, which would bring an estimated annual income of $923,000 by 2023.
Voting in favor of the plan, he said street paving is a necessary expense.
City Engineer Kevin Stafford, who normally assists the city in creating a list of street paving priorities each year, told The Dispatch he first heard of the potential for a tax-backed capital improvement plan at Tuesday’s meeting. He said he would be helping with the design of the plan if it comes about.
Some council members voiced their concerns of taking up millions of debt when the city’s financial outlook remains murky.
Ward 3 Councilman Charlie Box, despite voting in favor, said he’s worried about the timing of the bond issue as the city is projecting a 40-percent drop in sales tax revenue amid the COVID-19 pandemic.
“That doesn’t even take into consideration the businesses that we might lose because of this (crisis),” he said. “Maybe it might be wise to start this next year? Is it critical that we do this right now?”
Ward 2 Councilman Joseph Mickens, who was the lone dissenting vote, questioned the city’s ability to afford more debt while it’s still paying off money on some projects.
“Another thing that comes to the table … is what other bigger projects we’ve got looming down the road that we are going to have to tackle and deal with besides the paving,” Mickens said.
The public will have a chance to share their input, Gavin said.
If citizens wish to start a petition against the issue and put it to a vote, they must gather at least 1,500 signatures from registered voters in Columbus and submit the petition to Vaughn by 5 p.m. on July 7, the date of the first council meeting that month, said Chief Operations Officer David Armstrong.
That would trigger a ballot issue giving voters the final say in whether to approve the tax.
Some COVID-19 restrictions relaxed while others remain in place
During the meeting, the council also voted unanimously to follow state guidelines during the pandemic but put certain restrictions in place.
Apart from following state guidelines, indoor businesses in the city must keep a six-foot distance between customers, use signs and markers to provide instruction and require employees to wear masks.
Child care facilities must keep children who cough and sneeze away from others, check temperatures of all staff, require staff to wear cloth masks when in contact with children and make sure parents do not drop off sick kids. Parents must also report any suspected COVID-19 symptoms.
Conflict disclosure: Managing Editor Zack Plair took part in editing this article. He is currently involved in legal proceedings with the city of Columbus.
Yue Stella Yu was previously a reporter for The Dispatch.
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