KINGSPORT - The Board of Mayor and Aldermen got the ball rolling on a $10 million bond issuance Tuesday night where a majority of the money is earmarked for the realignment and improvement of Gibson Mill Road.
Kingsport leaders voted 5-2 during a regular meeting Tuesday night to approve up to $10 million in general obligation bonds. Tuesday's vote was an initial step toward issuing the bonds, and City Manager John Campbell said the amount could be lowered as the BMA goes through its budget deliberations.
Aldermen Ken Marsh and Pat Shull voted against the resolution, saying they wanted to see the capital projects funded by this bond issuance in connection to the 2008 budget.
Kingsport plans to go to the bond market within 45 to 60 days. The city has to wait at least 20 days before going to the bond market to allow residents the opportunity to file a petition to place the matter on a referendum.
Campbell said the BMA's final resolution on these bonds would take place after all of the informal discussion on the 2008 budget has taken place.
"If you're still debating this issue, certainly you could delay the final move to the bond market," Campbell said.
A proposed breakdown of the bond proceeds is as follows:
•$5.3 million toward the Gibson Mill Road realignment project and Watauga Road roundabout.
•$1.3 million for improvements to the Bays Mountain Park planetarium.
•$800,000 toward improvements to Fordtown Road.
•$1 million for land acquisitions related to economic development.
•$500,000 for preliminary design work associated with the higher education center.
•$250,000 toward the V.O. Dobbins renovations.
Finance Director Jim Demming said $600,000 has also been included in the bond issue to be used as capitalized interest.
The capitalized interest will be used to provide funding for the debt service costs associated with this bond issue until the 2010 fiscal year.
Demming said the city would also make some money off the issuance - getting the bonds at 4 percent interest while the money invested would earn 5.25 percent interest.
This $10 million bond issuance is separate from a two-part, $24.5 million bond issuance the BMA unanimously approved in November. The first phase ($15 million) was obtained in December.
The $24.5 million is earmarked for a new elementary school and fire station in the Rock Springs community, $1.8 million for capital projects at Kingsport City Schools, and various water and sewer projects throughout the city. The remaining $9.5 million in bonds is expected to be issued at the same time as this new $10 million bond issue.
During a BMA work session Monday night, Marsh said he was surprised to see the bond issue on the agenda.
"I see it as putting the cart before the horse. I've not seen the total city budget," Marsh said. "I'm supportive of most of the things on there, but it's premature to borrow money at this point. If any of these needs to be funded, we've got the cash on hand to fund it.
"I don't believe in borrowing money without a definite pattern of spending it, and we need to look at budget in the aggregate."
Marsh warned his fellow aldermen they were driving up the city's debt again.
"The escalator is going up," he said.
Vice Mayor Larry Munsey reminded Marsh the important thing to remember about debt is the city's ability to pay it back.
"Our ability to pay is outstripping the actual amount of debt," Munsey said.
Campbell said of the projects on the list, the BMA has given him a strong indication of proceeding with them.
Alderman Valerie Joh defended the bond issuance, saying the BMA has discussed the projects in the past.
"Kingsport needs those projects. Some we've put off a long time," Joh said. "I'm perfectly willing to go ahead and do this."
Marsh said Kingsport has cash on hand to carry the school project "down the road."
"Why borrow money when we have the money?" Marsh said. "I'm very willing to look at this in part of the total budget, but until then I will not support it."
Campbell said BMA policy is to not move forward with a project until all of the money is in hand.
The BMA held two meetings in February where they discussed at length the city's five-year capital improvement plan (CIP). Though the BMA has taken no formal vote on the CIP, city leaders have informally endorsed a $48 million major projects list presented by Campbell. In addition, no alderman has spoken out against any particular project.
With these new bond issuances, Kingsport's general fund debt stands at $75.6 million, which is 5.8 percent of the city's assessed value. State law allows Kingsport to take on up to 20 percent of its assessed value in debt. A BMA imposed policy sets the city's debt limit at 10 percent of its assessed value.
Demming said the two bond issuances would not increase the property tax rate for city residents in the coming fiscal year.