In September, the Mobile County Commission voted 2-1 to borrow $31 million for a handful of projects with a general obligation bond that brought the county’s total indebtedness to a level with which one commissioner is uncomfortable.
“The county holds too much debt,” according to Commission Chairman Jerry Carl, speaking of the $83 million currently outstanding from a series of general obligation bonds dating back to 2010.
On paper, the county shows $157 million of debt, but Public Affairs Director Nancy Johnson said about $74 million is related to the county’s Pay As You Go road building program, one utilizing series bonds that are paid off the same day they’re issued.
Despite the concern over the current debt load, Carl’s comments to Lagniappe came only two months after Moody’s Investors Service assigned an Aa2 rating — one of its highest — to the county’s active borrowing program.
In order to maintain the rating, the county is required to keep its annual debt service payments under $10.5 million. The Commission’s regular borrowing is on tap to finance projects for most of the next decade, which is laid out in the Capital Improvements Program it approved last April.
Moody’s gave an “upbeat forecast” of the future for Mobile County, anticipating “significant upcoming industrial and commercial growth,” but its prediction followed four years of declines leading out of the 2008 recession — causing a $32.1 million (23.3 percent) drop in general fund revenues for the county.On the bright side, Finance Director Michelle Herman projected a 3.37 percent increase in total revenue this year during the county’s budget deliberations, which would mean revenues in the neighborhood of $127 million for 2015.
So far, end-of-year adjustments have not been completed to gauge whether the estimate came to fruition, but Carl said the volatility of the county’s income in recent years is one of the reasons he’s uncomfortable with the current debt load.
“I wish we’d focus more on roads and bridges and less on buildings and parks,” Carl said. “It’d be better to make do with what we’ve got and focus on how we can cut our debt load. We had gotten our debt payments down to $8 million a year, so why do we need to go back up to the limit just because we can?”
Discussing certain projects slated for funding, Carl specifically referenced one of the largest allocations from the recent $30 million bond — $5.5 million set aside for the construction of an Emergency Operations Center for the Mobile County Emergency Management Agency.
Used for the coordination of response and recovery efforts during an emergency, the county has been studying how to fund the construction of a new EOC for years. Though the county is committed to funding the bulk of the approximately $12 million project, the building will be used by EMA staff.
Additional funding is coming from a hodgepodge of sources. The city of Mobile originally offered to contribute $7 million but has since reneged. Carl said he thinks the county should “wait a year or two” as opposed to borrowing money to move the project forward this year.
It’s worth noting that the county is on a bit of a time crunch with this particular project, as it only recently received a second three-year extension to a $711,000 grant from the Federal Emergency Management Agency to help build the facility.
Currently, the project is on schedule to start construction in September, but it’s still unclear who will provide the rest of the funding even with grant funding, bond money and a planned contribution from the Mobile County Communications District in the bag.
Commissioners Connie Hudson and Merceria Ludgood have prioritized the EOC project and told Lagniappe they are comfortable with the current borrowing plan, unlike Carl. The plan, they said, helps fund “critical infrastructure needs throughout the county” that wouldn’t be possible using only the general fund.
Speaking for both commissioners, Johnson said the Moody’s rating on the county’s “affordable debt burden” speaks for itself, also pointing out that Mobile County is far below the debt limit imposed on counties in Alabama’s Constitution — 5 percent of a county’s assessed property value.
“A lot of thought went into the policy, as well as consultation with the county’s financial adviser and feedback from our rating agencies,” Johnson said. “They said the payoff fits well into our budget, and the county generally stays below the debt policy ceiling of $10.5 million.”
That $10.5 million “ceiling” is self-imposed via a debt management policy the county adopted in 2012. The same policy requires “long-term debt only be used for capital projects that cannot be financed from current revenue sources, in conjunction with the 10-year CIP plan.”
The current CIP outlines 126,000 possible road and bridge projects, 4,000 economic development projects and 35,000 projects aimed at building or upgrading recreational facilities.
However, Carl said his concern is that the same plan has the county scheduled to borrow millions of dollars every two years to fund those endeavors. According to Carl, he’s “asked the Commission to skip just one cycle,” but so far the borrowing has continued on schedule.
Johnson said the Commission is under no obligation to borrow at the intervals laid out in the CIP, which has new bond issues slated for 2017, 2019, 2021 and 2023.
“The CIP is a guide. It shows how the county intends to phase in infrastructure needs, but these can change as the Commission has to analyze and vote on any debt issue as it comes up,” Johnson said. “The CIP plan doesn’t mean we will borrow every two years.”
Despite those concerns, commissioners have given no indication yet of borrowing money for any specific project. When asked this week if there was “any known project that would require additional bonding in the near future,” all three commissioners said “no.”