Council may seek financing for project

FLORENCE - Council members will decide today whether to seek bank financing to help pay for a massive road paving project in the city.

City officials solicited bids from banking institutions in Florence that were interested in financing the $7 million loan.

The lowest of three bids was submitted by SunTrust Bank, at 4.2 percent interest for 10 years. Council members will likely determine today whether to go with that bid or explore other options, such as the traditional bond market option.

The $9 million paving project is already under way. City officials say about 40 miles of city streets will be paved during the project, which is expected to be completed within 180 days.

The city had $2 million set aside to start the project, but must finance the remaining $7 million.

Dan Barger, the city's general fund accountant and treasurer, said the city will save significant money during the 10-year period by financing the loan through a bank. In addition to obtaining financing through the bond market, the city could also get financing through an Alabama League of Municipality program.

Barger said he's unclear exactly how much the city will save, but he plans to have an accurate total available for today's council meeting. He said Friday that he had not determined what the annual payment on the debt will be either.

"We would save the up-front cost associated with the traditional bond market; we will not need to involve a rating agency, and we will not have to purchase insurance," Barger said. "The 4.2 percent bid is extremely favorable in this environment."

The next best bid was from Compass at 4.5 percent, while Regions would charge 4.85 percent.

Barger said borrowing $7 million over 10 years would not affect the city's bond rating. He said the city, however, will report to the bond rating agencies that it is taking on more debt.

Councilman James Barnhardt pushed for the massive paving project and fellow council members agreed. Normally, it would take nearly a decade to pave 40 miles of streets in Florence.

"We decided to go with this major project now because there are a large number of streets that need immediate attention," said Mayor Bobby Irons. "Instead of doing a little here and little there over the next eight to 10 years, we wanted to make things better for citizens now.

"It's the right move. This will last a long time."

Barger said city officials are looking at the possibility of paying the annual debt on the loan, with half coming from the gasoline tax money the city receives each year and the other half coming from the general fund.

If that approach is approved, Barger said the city will still have money available to handle routine maintenance of streets during the 10-year period.

Council members will likely be asked today to approve the bank's proposal, If approved, they will have formal loan documents drawn up and could vote to approve the loan at their Aug. 21 meeting.

Tom Smith can be reached at 740-5757 or tom.smith@timesdaily.com.