Jackson is one step closer to issuing $35 million in road bonds, thanks to a recent vote by the city’s one-percent infrastructure tax oversight commission.
Last week, oversight members approved the mayor’s request to leverage bond money to issue up to $35 million in long-term debt.
“The vote the commission took today was a vote to respond to the cry of our citizens that we need to address the city’s infrastructure issues at a more aggressive pace,” Mayor Chokwe Antar Lumumba said after the meeting. “I’m happy we are inching one step closer to the city we can all be proud of.”
The mayor’s proposal was approved on a 7-2 vote, with commissioners Pete Perry and Jonathan Lee opposing.
The commission now must determine what projects to use the funds for, and then present the proposal to the Jackson City Council for final approval.
Funds will be used solely for road repaving and reconstruction.
Oversight officials have set the August meeting to discuss what roads to include in the funding package.
Ricardo Callendar, senior managing consultant with PFM, the city’s financial advisor, said the city would have to determine what projects to include in the package before approaching lenders.
Jackson also would have to determine the lifespan of the completed projects, to ensure that the improvements last as long, if not longer, than the bond repayment period.
Additionally, federal regulations would require work on bond-funded projects to get under way within two to three years of the bond issuance, Callendar explained.
Perry was concerned that the city would not have the capacity to begin work on $35 million more in road projects in the next two to three years, with the work that is already ongoing and expected to get under way later this year.
The city is already managing the North State Street and West County Line Road TIGER Grant projects. Construction is expected to get under way in the coming weeks on overlay projects for another section of North State, as well as East Northside Drive and Woodrow Wilson Avenue.
The commission also recently approved spending between $10 million and $12 million to repave roads across Jackson.
Perry questioned whether there were enough contractors locally to do the existing projects, as well as new ones.
“Thirty-five million dollars in road construction will be going on at the end of the year. This would be another $35 million. Are there enough contractors to do it?” he asked.
Jackson Engineering Manager Charles Williams tried to allay Perry’s concerns, saying the city can’t afford to kick the can on its infrastructure needs.
“The streets are in poor condition, the sidewalks (are crumbling), we have signals that need to be (changed out). We still have issues with water and sewer … We still need help with the TIGER grant,” Williams said.
“We have projects that could be funded, (we) just need the cash flow. That’s all we need on our side.”
Callendar presented two options for borrowing: issuing $35.8 million at once or breaking the amount into two smaller bonds.
In both cases, the bonds would be paid back over 10 years, using a third of projected revenues from the one-percent tax.
The tax generates about $14 million a year. Under the first plan, Jackson would issue $35.79 million, and pay $4,246,000 over the next decade to retire it. Payments would begin in 2020, and would end in 2029, according to city documents.
Under the second plan, the city would issue $17.5 million in 2020 and $17.5 million in 2022. The city would repay about $2.3 million a year between 2020 and 2029 to retire the first bond, and $2.3 million a year between 2022 and 2031 to pay off the second bond.
Even with those payments, Jackson would still have more than $9 million a year in revenues available for emergencies and other needs as they arise.
Callendar told the commission now is a good time to borrow, citing low interest rates.
Current interest rates on 10-year bonds are 1.63 percent, down from 1.97 percent three months ago, and 2.47 percent a year ago, he said.
Whether Jackson could get such a low rate remains a question.
Last fall, Moody’s downgraded Jackson’s general obligation bond rating, citing the city’s “reliance on support of Jackson’s general fund” to help cover water and sewer bond debt.
Typically, water and sewer bonds are repaid with funds generated by collections from water and sewer user fees. However, last year that fund was about to go bankrupt. This year, Jackson is again planning to use general fund dollars to make the September water bond payment.
A lower bond rating could translate into higher interest rates on the bond market.
Callendar said he was “100 percent confident” the city could obtain a bond rate close to the current market levels.