A proposal to borrow $17.5 million for a capital improvements program for Vicksburg would split the program into two phases with the city borrowing between $5 million and $12.5 million in 2015 and the balance at a later date, according to a plan released by Vicksburg Mayor George Flaggs Jr.
Flaggs’ proposal followed a Dec. 19 meeting of the city’s capital improvements committee in which the members agreed to postpone a proposed $25 million utilities improvements program until 2016, and consider two borrowing options to fund the first phase of capital improvements.
According to a letter from Flaggs, the projects and the method to fund them will be determined at an April 1 meeting.
He said Friday the April 1 target gives him time to examine the first six months of the city’s revenue collections. He will meet next week with financial experts and former Vicksburg Mayor Demery Grubbs, who is with Governmental Consultants Inc., a Jackson company that advises city and county governments on financial matters.
“It looks like to me that we ought not to borrow the whole $17.5 million if we’re not going to use it,” Flaggs said. “We can’t obligate another administration, so I’m inclined to say, let’s borrow $5 or $6 million now for this term, and let the other administration take care of itself. It doesn’t make a lot of sense to borrow more than you agree you can pay back.”
According to Flaggs’ announcement, two funding plans are under consideration: borrow from $5 million to $7 million, or from $10.5 million to $12.5 million. The mayor said Friday he wants to be able to pay off the bonds from the general fund.
“All the money will be borrowed in a way that it can be paid out of the general fund and we won’t have to raise the ad valorem taxes, because I refuse to raise ad valorem taxes for any project unless it’s an emergency,” he said.
But North Ward Alderman Michael Mayfield believes using the general fund to pay off a large loan could present problems down the road.
“That sounds good on the surface, but there are some things that are going to be very hard to do from the general fund, because when you tie up your money in the general fund, and you don’t have anything to back you up, sometimes you end up doing the thing I fear the most, and that’s pulling up the rear,” he said.
He believes city officials need to proceed cautiously with the funding options.
“You have to make sure you explore each and every one of them very thoroughly and very carefully, because sometimes the one that looks the best on the surface could end up being the very worst one,” he said. “I think we need to be careful making that decision, because most of all, this money has to be paid, has to be paid timely, so you want to make sure what rate you can get this money at, and length of time.
“Those are the two most serious factors you have to weigh on the front end.”
The city currently has an A2 bond rating from Moody’s Investment Services, a New York-based provider of credit ratings and risk analysis, which restored the rating in July, more than two years after pulling the city’s credit rating because of incomplete audit reports going back to 2008. Vicksburg’s current debt limit is $48 million.
Flaggs said the city’s revenue picture for the first six months of the 2015 fiscal year, which began in October, should provide an indicator of how much the city would be able to borrow.
“We may be able to raise that $5 million to $6 million; we may be able to go to $7 million,” he said. “I do not want to obligate the city to any indebtedness I don’t think it can pay, based upon its general fund structure.”
He added the city’s financial picture will improve by 2018, when it pays off an $18.5 million loan made in July when the city consolidated two bond issues from 2003 and 2007.
“You know we will be in good shape after 2018, because to the fact you got that other debt off.
2003 and 2007 bond issues,” he said.
Mayfield said the committee expects to hold several more meetings before it sets priorities for capital improvements and determines how the work will be funded.
“I think our (projects) list is pretty close to being on the point, now. I think we’re pretty close to sealing that list,” he said.
“Personally, I like the option better of going piece by piece (and) getting the more serious parts of the capital improvements done first, which includes paving, infrastructure, and those are going to be the first things we’re going to look at,” he said. “We need some serious paving done throughout the city and infrastructure is also at the very top of the heap.”
He said the committee would examine the proposed projects and the financing, adding, “I think the board has had some great meetings on this, but nothing is in concrete yet. I expect it to be very soon. We expect to sit down with our accountant and work this out, because everyday that we lose is a day we won’t get back.”