Pay-as-you-go option for capital improvements passes in Alabama

BY SourceMedia | MUNICIPAL | 11/22/22 08:50 AM EST By Thomas Nocera

Alabama's municipal governments have an alternative means for funding capital improvements following voter approval of a ballot measure on Nov. 8 that will open up special tax revenue for pay-as-you-go projects.

Amendment 6 allows local officials to have access to a pool of funds traditionally reserved for bond debt service payments to now pay upfront for piecemeal capital improvements.

By granting access to a pre-established funding framework, the measure will offer municipal officials greater flexibility when determining the size or timeframe of a particular project while limiting the amount of interest-bearing debt needed to finance improvements, said District 10 State Rep. Mike Ball, who introduced the funding proposal to state lawmakers in February. This will ultimately result in net savings for municipalities.

"The constitutional amendment was already in place, the tax was in place and the money's coming in," Ball said. "Municipalities didn't want to have to go into debt to be able to fund projects."

The measure received strong bipartisan support from state lawmakers in the run-up to the vote.

Mayor Ron Anders Jr. of Auburn, Mayor Tommy Battle of Huntsville and Mayor Randall Woodfin of Birmingham in an op-ed urging voters to approve the measure, said Alabama's capital financing system was "antiquated," and based on "decades-old provisions deep within Alabama's legal system."

"Some cities must borrow money with interest to build a fire station rather than pay for it with their revenues," the trio said in the op-ed. "It hurts the citizens of Alabama when their local governments must take on cumbersome levels of interest and loan closing costs in situations when they should be able to pay."

Ball said the approved proposal means that municipal officials now have the option to quickly access smaller sums of money than is possible through traditional bond issuance, expanding the scope of projects that towns and counties can take on independently.

This will help localities tailor projects and funding to the pace of their individual economic development, Ball said.

Huntsville, the state's largest and fastest-growing city, has seen its population nearly double in the last 10 years and its economy grow quickly. The city and others like it pursuing widespread capital improvement in transportation and business infrastructure to accommodate economic growth will benefit from the proposal and the extra stream of funding it opens up.

"There's a myriad of things, and I'll let the great minds of the city figure it out," Ball said. "But we've got more things we need to do in Huntsville than we'll ever have money for because we're growing so fast, and this will help to stay ahead of the growth."

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