Special Called Work Session 12-19-2024
Agenda
Minutes
CITY OF SOUTHSIDE
COUNTY OF ETOWAH
STATE OF ALABAMA
The City Council of the City of Southside convened for a special called work session at the Southside City Hall on Thursday, December 19, 2024. Prior notice of this meeting was given in compliance with Resolution No. 0-035-2005 of the City of Southside, Alabama, and the Alabama Open Meetings Act. Mayor Dana Snyder called the meeting to order at 4:02 p.m.
The following council members were present: Mayor Dana Snyder, Council Members: Keith Clay, John Hatley, Danny Garnett, Don Steward, and Joseph Hutchins. With a quorum being present the meeting was opened for the discussion of business.
THE FOLLOWING WERE ON THE AGENDA FOR DISCUSSION:
Presentation and Discussion by Frazer Lanier and the Finance Director regarding Financial Policies and Potential Opportunities
Mayor Snyder opened the meeting by stating that the City of Southside is in its best financial position to date. She stated that the current budget is a very good one, assembled in meetings between herself, the council, the finance director, and all city department heads. She also mentioned many recent upgrades and improvements within the city and its facilities. She then stated that the city has a nest egg of money and needs financial policies adopted to govern its use. She stated that a team of people including herself, Finance Director, Nickie Pylant, Lee Garrison, investment banker with Frazer-Lanier Inc., City Attorney Richard Rhea, Joella Bogle, and Katie Condit; Auditors with MDA Professional Group, Mike Sewell with McClure, Sewell, Johnson and Associates, and Kane Burnette, bond attorney with Bradley-Arant have been in phone conversations and emails working on drafting a written, official financial policy for the city, that would need to be formally adopted by the council. This presentation was intended to share information with the council for them to have a working knowledge of the financial position of the city, and provide input on the financial policies.
The mayor stated that the council is in a good position to set the stage for the success of any future administration of the city by having financial policies in place and formally adopted. She told the council they would receive examples of financial policies of other cities, some larger, some smaller as points of reference and comparison, so they would be able to give their input on any financial policies to be set forth for the city. The mayor then introduced Lee Garrison, former four-term council member and financial chair of the Tuscaloosa City Council, an investment banker for Frazer Lanier Inc. to present a recommended plan of action tailored for the City of Southside through input from the aforementioned team.
Mr. Garrison took the podium and explained his background and experience with municipal financial plans. He stated that Frazer Lanier was currently working with Etowah County, Rainbow City, Glencoe, and other municipal governments in the Etowah County area. He cited recent collaborative efforts between municipalities in the area.
Mr. Garrison stated that the goal was to provide a clearer picture of the finances, and possibly policies that needed to be adopted to guide this and future councils in decision-making regarding financial matters. He presented the following items as a plan of action to be addressed:
1.Adoption of Financial Policies /importance of a reserve fund of at least 15% of the budget (1.2 million dollars) Mr. Garrison discussed the importance of establishing a reserve, and a “floor” that the reserve should only go below in the case of a dire emergency, such as a natural disaster. He stated that financial policies are merely put in place to facilitate better financial decisions for the city. He also emphasized the necessity of having written, adopted financial policies in place, should the city ever wish to borrow money in the bond market, and explained the governmental reserve requirements in place. He explained that having financial policies in place has a positive impact on interest rates, is a good source of transparency, and provides a sense of accountability. Mr. Garrison then turned the podium over to Finance Director, Nickie Pylant.
2.Payoff Of Some Existing City Debt and why this would be a benefit was discussed by Finance Director, Nickie Pylant. She told the council and audience that the group had focused on deciding which current debts the city could afford to pay off immediately. She stated that the city has significant funds currently in savings, which could be used for this purpose. Specifically mentioning an account called the G.O. 2013 Bond-Issue Savings Account, and the 2019 Metro Savings Account. Both have large balances, with the G.O. 2013 Bond-Issue savings having a higher balance than is owed on the G.O. 2013 Bond Issue. Ms. Pylant explained that this account is currently funded by a direct deposit from the local sales tax the city receives. These funds are dedicated to paying a General Obligation Warrant from 2013, which has graduated payments, beginning at $15,000/ year. This loan has 3 payments left, one for $ 350,000, one for $ 315,000, and one for $ 35,000, for a balance owed of $700,000.00. Interest is paid twice yearly on this warrant, and was just paid in November. The SSUT taxes the city receives (Internet Sales Tax) are currently direct- deposited into the 2019 Metro Savings account. This revenue was originally around $5,000/month and has grown to approximately $65,000/month. The 2023-2024 actual revenue deposited into this account was $772,000. This account dedicates these funds to be used toward the 2019 Metro loan, and the loan for the property purchased in 2022 at the bridge.” The 2022 Bridge Property Loan.”
She then addressed the proposed city debts to pay off: The 2006 AmFund Loan, with an original balance of 1,010,000.00 at 4% interest. It requires 2 yearly payments, and interest payments are made on this obligation monthly. It is currently paid through the Capital Improvement Fund, which receives $80,000/ year from Alabama Trust. If this was paid off, those funds could be directed elsewhere. There is only a $75,000 balance on this obligation. The 2013 BB&T Loan, with an original balance of 3.165 million dollars at 2.675% interest. The payments are on a graduated scale with 2 interest payments and one principal payment annually. This is paid by the G.O. 2013 savings account. There is enough money already in the account to make the yearly payment, with regular monthly deposits still going into the account. By the time next year’s payment is due, there would be enough deposited to pay it off as well. The savings in interest to pay this off now would be around $18,000. The 2022 Bridge Property Loan, with an original balance of $300,000, at 4.9% interest, requires one payment/year. It is paid from the 2019 Metro Loan Savings Account, and the interest saved by paying this off would be around $19,000. Director Pylant stated that if these 3 loans were paid off with existing funds already sitting in the previously discussed savings accounts, the city would be saving $37,000 in interest. She recommends that the council authorize her to pay the 3 discussed loans off. If the council does not wish to pay the loans off, she requested to at least invest the funds sitting in the savings accounts in C.D.’s which would earn more money than the current interest rates on the savings accounts.
She stated that if the city currently has 2.684 million dollars in these savings accounts, and if the 3 recommended loans were paid off, there would be around 1.7 million left. If the council were to follow the recommended plan and move money to a reserve fund, (15% of current budgeted revenues), 1.2 million dollars would be moved to reserve, and there would be around $500,000 left over after all outstanding interest was paid. These remaining funds could be put into the general fund, the reserve fund, or a debt fund. There was discussion by the council of previous experience with the need for emergency funds during natural disasters, and having a reserve fund would have been beneficial. Director Pylant stated that should the council choose to pay off the debt, there would be a need for budget amendments, and she reiterated the fact that none of the funds proposed to be used were coming from planned revenues, they are already sitting in savings accounts.
3.Review of Legal Debt Limit was addressed by Attorney Kane Burnett, who explained that the net assessed value of the property in the city was a little over $110,000,000 (not including motor vehicles), and the debt limit would be 20% of this amount, or $22,000,000. The city currently has a total indebtedness of around 7.5 million, leaving a margin of over 14.35 million
4. Review of Debt Capacity within the General Fund Budget was also covered by Director Pylant
5.Review Capital Projects was discussed by Mayor Snyder, who touched on projects on the council’s wish list: The further development of the Hood Road Softball Complex; which the council has already approved engineering and prep for. This is a multi-phased project, with the estimate for phase I being $4,274,891.00, phase II 1,848,000.00, and phase III $41,400.00 for a total estimate of 6,164,428.00. Drainage Issue on Powell and Watson Streets; there are 2 different plans for the solution of this problem, Plan B costs: $286,000.00 plus a property purchase cost. The Tap Grant Sidewalk Project on School Drive was already approved and the grant was accepted, engineering is currently ongoing on this project. The preliminary cost estimate for this project is $1,181,000.00, which is expected to go down due to possible adjustments to the engineering plans. The Tap Grant will provide $800,000.00 in federal money toward the cost of the project. (80% federal grant with a 20% local match)
Mr. Garrison returned to the podium and showed the council details of the potential bond opportunities in the existing financial climate. He discussed different scenarios that could affect the tax-exempt bond market and where the city would fall as far as rates at this time. He also explained the mechanics of the bond market and how it functions. Mr. Garrison stated that Frazer Lanier currently considers the City of Southside in the A-A+ rating category.
There was a discussion of the city’s aggregate debt and the benefits of paying off part of it, as it could relate to future potential bond issues and the benefit of knowing exactly what the city can afford as manageable debt.
The importance of the city’s timely yearly financial audit and its role in the rating process were explained.
Discussion of varied options to grow any funds borrowed on the bond market.
Discussion of various paving projects/opportunities within the city.
Discussion of recent intersection studies/solutions for issues
Discussion of expense projections for the sidewalk project
Discussion by the council of the need for written financial policies.
Mr. Garrison explained the difference between “good” and “bad” debt.
Discussion of the possibility of alterations to the phases of the park plan.
Discuss the potential return on investment in implementing the Softball Complex expansion, and changing the location of deposits of currently designated funds.
Discussion of current disaster funds, and potential disaster fund
Discussion of in-house financial policies, and the need for written, adopted policies for the city.
Discussion of the possibility of paying off all or part of the discussed loan balances. The council decided to add the payoff of the 2006 AmFund obligation, (the money is in the account to pay off) and the payoff of the 2022 bridge property loan (money is in the 2019 Metro Loan Savings Account) to tonight’s council agenda. This would save $19,000.00 in interest. The funds to do this are sitting in accounts designated for this purpose
The council agreed to take a five-minute recess at 6:17 and reconvene for the regular Council Meeting after.
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Cindy Beshears, Acting City Clerk