The rate hike will be necessary to cover the debt incurred by the approval of a $10 million bond issue Monday night.
According to interim city manager Brian Muenger, the $10 million issue, like a previously discussed $7.5 million, would roll the debt from 2003 and 2004 bonds into the new package at historically low interest rates.
The annual debt service on the new bond package would be $1,170,606.
The council was given a copy of projected revenues from rate increases showing figures for 1 percent, 4 percent and 8 percent. A 1 percent increase would result in $273,063 in operating income after debt service, for projected debt service coverage of 123 percent.
A 4 percent hike, which Muenger said he would probably recommend, would leave $447, 437 in operating income for coverage of 138 percent. “Three or four years down the line, if we need to, we can always go back to the market to borrow some more,” Muenger said. “Coverage of about 125 percent is usually standard, so we should feel very secure at 138 percent.”
An 8 percent hike would leave $679,936 in operating funds with 158 percent coverage.
The borrowed funds would go toward bringing the water and sewer systems into compliance with consent agreement with the Alabama Department of Environmental Management and the U.S. Environmental Protection Agency. The overall cost of this process was estimated at $15 million.
“We’re going to be doing a tank restoration project that is part of the ADEM order, but the bulk of it will go toward inflow and infiltration improvements. That’s the only continuing area of concern that got the city into trouble in the first place,” Muenger said. “We’ll be doing I&I studies, line replacement and targeted sewer replacement. Those are the primary things. We will also be conferring with our engineers and getting their professional recommendations, but these are our primary areas of concern.”
The memo also goes on to say, “During discussions with Larry Ward of Morgan Keegan, Ward indicated that the preparation work for the bond submission is approximately 90 percent complete, and that pending council approval, could be issued within approximately four to five weeks.”
Also Monday, the council:
• Heard Mayor Brian York present the Top Gun employee of the month award to Library Aid Sherron Stockdale.
• Approved plans for a 199 foot monopole on Ironaton Road for AT&T, which will provide 2G and 3G service to much of the city.
• Approved a contract with Meeks Environmental Services for sludge hauling at the wastewater treatment plant through November of this year.
• Approved the purchase of turnout gear for the fire department totaling $41,300.
• Approved separate contracts with local Babe Ruth and Cal Ripkin leagues and the Parks and Recreation Department to evenly split the entrance fees for the 2010 All-Star Tournament.
• Agreed to meet Aug. 16 and possibly schedule a separate budget meeting.
• Approved water and sewer invoices by a vote of 3-1, with Tucker dissenting.
• Approved participation in the sales tax holiday from Friday, Aug. 6, to Sunday, Aug. 8.
• Heard fire Capt. Mark McElroy announce that bids for a new fire truck were ready to be sent out.
• Appointed Andrea Montgomery to the Historic Preservation Commission.
• Heard Tucker ask that ditches the city has maintained in the past but are on private property be maintained again.
• Discussed, but did not agree on, parking arrangements for people who live in the apartments on the square.
Contact Chris Norwood at cnorwood@dailyhome.com
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