Thomas talks about city debt

BOX: City of Dothan outstanding debt is $60,151,018
$6.4 million for radio system
$8.2 million for water projects
$21.6 million for sewer projects
$11.4 million for schools
$12.4 million for streets and storm sewer improvements
Source: City of Dothan Finance Department
(Does not include Retirement Systems of Alabama debt)

With the 2008 performance report in hand, Dothan Mayor Pat Thomas said accomplishments made during the current administration have predominantly been pay-as-you-go projects.

More than 100 items listed in the eight-page report were accomplished with no long-term debt, Thomas said.

“In the three years and three months I’ve been in office (as mayor), we’ve borrowed for two items,” Thomas said. “We borrowed $9.5 million for two wells and lines and we have paid half of that back. We also borrowed $12 million for a citywide communications system because our system would not work in big box retail stores. We paid $4 million up front in cash.”

Both expenditures were approved in 2006 and financed as short-term debt over five years. The water wells will be paid for in 2011 and the communications center comes off the books in 2012.

“There’s your total debt. There is no long-term debt. Most everything done,” Thomas said, raising a copy of the report, “is based on the one-cent sales tax.”

The Motorola communications system is costing the city more than expected. Homeland Security/Nextel and commitments from Sen. Richard Shelby and former Rep. Terry Everett, were to have paid $5.5 million of the cost. Thus far, the city has received $583,382 from Nextel.

The city did the short-term financing on the recommendation of Finance Director Angela Palmer, and saved considerable money by having a short finance period, which also brought a better rate. Palmer said after 2012, the city’s debt service payments will decrease $3.3 million.

Thomas said it is important that people understand city government is not incurring a lot of debt despite the thought that the city is a tax-and-spend entity.

“There is a feeling among some people that we are strapping debt to our grandchildren,” Thomas said. “We have borrowed very little. There are different types of debt and there is very specific debt the city has a hand in. There are several bond issues that make up our indebtedness.”

Two huge projects loom on the horizon, estimated to cost nearly $100 million. The decommissioning of Beaver Creek Wastewater Treatment plant and expanding the Little Choctawhatchee plant, and running intercept lines between the two, is estimated to cost $46 million. The state has sued the city to act on closing Beaver Creek due to repeated permit violations regarding content and flow.

The other project is to draw water from the Chattahoochee River to supplement the current ground water supply. It is estimated that project will cost $50 million.

Over the past 10 years, the city has borrowed money as follows:

n A $13 million bond issue in 1998 to pay for the construction of the Dothan Tennis Center, the central fire station, water tanks, water wells and storm drainage.

n A $24 million bond issue in 1999 to construct three new elementary schools and a multipurpose center at Northview High School.

n A $17 million bond issue in 2000 to pay for sewer transfer lines and improvements.

n A $4.8 million bond issue in 2002 to pay for vehicles and new equipment.

n A $9.5 million bond issue in 2006 for water wells and lines.

n A $12 million bond issue in 2006 for a communications system.

Palmer said the projects prior to 2000 were driven by former City Manager Jerry Gwaltney. Chester Sowell was mayor at the time.

The city also has a huge outstanding debt with the Retirement Systems of Alabama, which Palmer does not include in the total debt because “it is an actuarial assumption” and is not part of the constitutional debt limit computation. That debt is $115 million.

The city currently has 952 active RSA members and 419 retirees. As long-time retirees come off the system the city’s unfunded liability will decrease.