City, UB agree on bond issue
Published 11:59 pm Tuesday, July 14, 2009
The Utilities Board of the City of Andalusia agreed to modify its operating agreement with the City of Andalusia to allow the city to move forward with a proposed $6 million bond issue.
The agreement states that the Utilities Board will not be a party to the bond issue, but will pay a pro rata share of the debt and interest, based on the utilities’ portion of the proposed projects.
Last month, the council agreed to move forward with financing a complete redo of River Falls Street after the city received $1.5 million in grant funds for the project. In addition, the city has entered a purchase agreement for 38 acres at the Alatex site and an additional 6.5 acres that fronts on the bypass, as well as the buildings on the River Falls Street property.
Johnson told the council it made sense to also secure funding to renovate the old Church Street School and to renovate Johnson Park. In addition, a $500,000 loan secured by the previous administration for capital projects will be rolled into the proposed bond issue.
Ken Funderburk of Merchant Capital LLC attended the meeting to answer questions about the proposed bond issue. Funderburk said the bond market is “alive and well,” although the climate has changed.
In the past, he said, a municipality relied upon the bond rating of its insurance company. Now, he said, projects have a better chance of being funded if they carry their own bond ratings.
“There are two triple-A rated companies left,” Funderburk said “One of those is declining to write in Alabama. We are still doing projects with the remaining company, but it’s more important than ever to have a stand-alone rating.”
Both Johnson and Funderburk said that the agreement passed yesterday makes it easier to get the project rated.
Johnson said an amortization schedule will be set up between the city and the Utilities Board. The Utilities Board will only pay interest on its portion of the new bond issue until previous debt service payments between the city and Utilities Board are paid off.
At present, those include $5.9 million in debt, with annual debt service of $735,307. Those pay off in 2012, 2021, 2020, 2022 and 2024.