FAIRHOPE — The city of Fairhope’s finances were discussed at the City Council meeting Thursday, May 31 during a presentation of the city’s General Obligation Warrant (GOW) rating conducted by Standard and Poor’s, an international company …
FAIRHOPE — The city of Fairhope’s finances were discussed at the City Council meeting Thursday, May 31 during a presentation of the city’s General Obligation Warrant (GOW) rating conducted by Standard and Poor’s, an international company that rates businesses, governments and municipalities.
The GOW received an A+ rating, and the city’s outlook was rated “stable.”
City Treasurer Nancy Wilson said the city’s rating is a “wonderful” one for which residents should be “excited about and grateful for. It’s important we get a good rating because that’s what people put their faith in,” Wilson said.
Bob Gentle, council chairman, said “the greater the rating, the lesser interest of risk would be involved” for the city.
As far as the city’s total long-term debt, it tops off at $16.7 million. Though initially, this may sound like a lot, the maximum legal limit for the city, which is based on the total assets of the city, is $38.6 million, making Fairhope’s current debt far below the limit.
“We never want to have that much,” Wilson said. “That shows we’re in a good position because we’re nowhere near that.”
Considering the hurricane damage and extensive capital projects Fairhope has undertaken, city officials think $16.7 million is not a considerable amount of debt. However, the council plans to begin reducing that amount.
Gentle said the council is not planning on spending anymore money on capital projects.
Councilman Cecil Christenberry said there will still be other ongoing projects dealing with intersections and roadwork, but for the major projects like the municipal pier repair and the new library, the council will back off.
“I think we’ve got a lot done, and it’s probably time to tighten up a little bit and take a close look at the next five years,” Christenberry said.
Wilson agreed with the need to spend less money on large projects.
“With the borrowing we’ve done this year and last year, we’ve put a lot of capital improvement in the city and we’re going to slow down and pay off debt now,” Wilson said.
In addition to that, Gentle said the city is paying around a million dollars each year in debt service.
Wilson said just by attrition, the debt will decrease, and the new bond issue is paying off $2.7 million in curent debt.
During the meeting, council members voted to put a cap on their level of borrowing and the debt they owe at $17 million. Initially, there was concern that this amount didn’t provide much leeway for borrowing money in case of an emergency. However, they learned it will not take a unanimous vote of the council to remove the cap if need be, only three votes.
Wilson said she thinks the cap “keeps our thinking focused on doing a good job of managing the funds we have and making them work to their highest potential. It forces you to live within your means and not think the sky is the limit.” Wilson said.
Gentle said the cap doesn’t mean very much, but it does show the council’s fiscal responsibility.
“It doesn’t make a difference because we’re going to do that in spirit anyhow,” Gentle said.
“We’re gong to do our best to cap it at $17 million, and we’re going to work really hard to do that, but if something comes up then it means nothing,” Christenberry said.
Though the cap may need to be removed in the future to deal with unpredicted crises, the city also has a contingency, or “rainy day,” fund that had a $2 million balance before hurricanes (Ivan and Katrina) hit and repair was needed.
“When the storms came, we set up a $2 million line of credit at the local bank for storm repair issues and that’s what we generally funded the pier with,” Gentle said.
Wilson said the fund has also been dipped into this year because the city did a good amount of pay-as-you-go financing.
Monthly deposits are made into the fund, Wilson explained, so the fund is not depleted, and will not be as it is an ongoing fund.
Gentle said the council works hard to be up to speed on the finances and work on better budgeting.
The rating highlighted the improvement of the city’s finances over the past several years.
Wilson said this year’s rating is only a reaffirmation of last year’s, and city finances have greatly improved since 2000.
“We have increased our assets with capital projects, and we’ve just better managed our money,” Wilson said.
Wilson said Fairhope’s general fund had a negative balance of $1,200 in 2001 and has increased to its current balance of $1.87 million.
Fairhope’s finance committee will meet Monday, June 11 and the council will be present.
“We’ll be talking about the current year budget, the status of where we stand in respect to the budget and talking about projections for the new year and just looking at the general financial standing for the first half of the year,” Wilson said.