The issue: The municipal bond issue
Published 12:00 am Sunday, November 25, 2007
Our take: The Selma City Council should consider all angles before finalizing this vote.
Anytime a business or governmental entity begins to look at acquiring debt, the leaders of that business or governmental body generally examine the purse before tossing out the ideas.
That’s something we haven’t see much of, a public reckoning of where Selma stands financially. What we’ve heard is that the vice president of public finance for Sterne, Agee and Leach Inc. of Birmingham has said debt can be a good thing for municipalities, and the City of Selma can handle it.
The city owes $1.7 million in bond debt, but it has a capacity of around $20 million. That’s how much the city can safely borrow, the bond man said. The proposed bond issue should tally about $12 million in projects plus the cost of working with bond attorneys and specialists, such as Robert G. Thomas of Sterne, Agee and Leach. There will also be an estimated $8 million in interest to pay if the bond payments run the full course of the proposed amortization.
Our problem is that’s about all we’ve heard asked about our financial situation. Nobody has really dealt in financial specifics in these public meetings. For instance, a report in The Selma Times-Journal has revealed that the library project is based on 4-year-old cost estimates.
Mayor James Perkins Jr. says that’s a non-factor because the council can spend the money any way it wants to as long as it stays within the guidelines of what the people vote for.
But if we’re going back to 4-year-old cost estimates on the library, what other old figures are we working from?
The latest audit for the city said that as of Sept. 30, 2006, the city’s net assets totaled $26.483 million. The audit also looked at fund balances, a measure of current financial resources and said they increased by $1.43 million to a total of $10.4 million and of this total, $9.1 million is available for future programs.
During 2006 the city made principal payments totaling $940,000 on all bonds and warrant debts without any additional long-term debts. It was a good financial year for Selma. Sales tax was up and business license were up from the previous year, according to the audit.
That’s good news. However we must move cautiously in this time of economic uncertainty. A national election year is on us. Usually, growth reaches a plateau as investors and other players on the nation’s financial front wait to see what will happen. When the national butterfly moves its wings, generally the results move on down the line.
We’d encourage the council to study closely the total cost of the bond issue and weigh it against the city’s financial stability. We’d also encourage the public to look closely at the bond issue proposal. We’ve published the full ordinance on page 9 of this edition of your newspaper.
It’s not the time to move hastily into acquiring debt. We agree with the mayor that we need to invest in ourselves, but we urge caution and care in doing so.